The Easter Holiday Effect in Trading (Holy Thursday – The Best Day Of The Year For Stocks?)

Easter is a Christian holiday celebrated across the world. But does it affect trading on the U.S. stock exchanges and other financial markets? We look at how the stock market performs before and after the Easter holiday. Additionally, we specifically look at the performance of stocks the day before Good Friday – Holy Thursday.

Easter is a Christian holiday celebrated on a Sunday. It is not a federal holiday in the US, so no weekday is marked to observe the holiday. As such, it does not affect trading on the weekday before or after it (except for Good Friday which is a non-trading day). The Easter Holiday week is very positive while the week after Good Friday performs more or less like any random week. Holy Thursday, the day before Good Friday, is an exceptionally strong day for stocks.

Let’s look at how the S&P 500 performs before and after the Easter holiday:

Key takeaways

• ​The article examines the “Easter Holiday Effect” in U.S. stock trading, focusing on the period leading up to Good Friday, particularly Holy Thursday.
• The strategy involves purchasing stocks at the close of the Friday preceding Easter week and selling at the close of Holy Thursday, which is the day before Good Friday.​
• Long-Term Returns: Over a 63-year period, this approach yielded an average return of 0.77% per trade.​
• Recent Performance: Since the year 2000, the average return increased to 1.49% per trade, indicating a strengthening of this seasonal effect in recent decades.​
• Risk Profile: The strategy exhibits a favorable risk-reward ratio, with gains typically outweighing losses.​
• Holy Thursday Strength: Holy Thursday stands out as an exceptionally strong day for stocks, contributing significantly to the overall positive performance during Easter week.
• Post-Easter Week: The week following Easter does not display any consistent or notable trading patterns, performing similarly to any random week in the market.​
• Contextual Factors
• Market Closure: Good Friday is a federal holiday in the U.S., during which stock markets are closed.​
• Investor Sentiment: The positive returns observed during Easter week may be attributed to factors such as increased investor optimism, reduced trading volumes, and institutional behaviors surrounding the holiday period.​

The Easter holiday

Easter is a Christian holiday that celebrates the belief in the resurrection of Jesus Christ, the founder of the Christian religion. The holiday concludes the commemoration of “the Passion of Jesus Christ” — a series of events and celebrations that begins with Lent (a 40-day period of fasting, prayer, and sacrifice) and ends with Holy Week, which includes Good Friday (the day Jesus died) and Easter Sunday.

While Good Friday is a federal holiday in the US, Easter is not. Easter is celebrated on that Easter Sunday by Christians who observe it, but no weekday is set aside for its observance.

When is it?

Easter is celebrated on the first Sunday following the Paschal Full Moon that occurs on or just after the ecclesiastical spring equinox — March 21. Easter 2022 took place on Sunday, April 17, 2022. The Easter holiday of 2023 will be on Sunday, April 9, 2023.

Is the day before or after it a trading day?

Easter is a Christian holiday celebrated on a Sunday. It is not a federal holiday in the US, so no weekday is marked to observe the holiday. As such, the day after it, Easter Monday, is a trading day.

However, the weekday before it is the Good Friday, which is a federal holiday in the US and, therefore, not a trading day.

What is Holy Thursday?

Holy Thursday, also called Maundy Thursday, is a Christian observance day in the United States and also a public holiday in a few protestant countries, like Norway for example. In the US this is a trading day and a very good one for that.

Backtesting the Holy Thursday strategy

Let’s first backtest the day before Good Friday: Holy Thursday. Our backtest is really simple:

We buy at the close of Wednesday before Holy Thursday and sell at the close on Holy Thursday. This is all there is to it! We use the S&P 500 as a proxy for the stock market.

The equity curve since 1960 looks like this:

The average gain per trade is 0.35%, the win rate is 68%, the profit factor is 4.1, and the max drawdown is a tiny 2%. These are pretty good trading metrics! We would assume that Holy Thursday is one of the best trading days of the year.

Let’s also backtest if we buy at the close on Wednesday and sell at the open on Holy Thursday. We don’t have opening quotes before 1993, and thus test from 1993:

The average gain is 0.25% and the win rate is 63%. This compares to 0.44% if you held onto the close during the same period.

If you would like to have the Amibroker code for our Holy Thursday trading strategy you can purchase it by becoming a member.

Hence, we can safely conclude that the Holy Thursday trading strategy is among the best trading days of the year!

The week after Easter holiday

How have stocks performed the week after the Easter holiday?

We backtest the following strategy:

• We buy the close of Holy Thursday, the before Good Friday
• We exit at the close 5 trading days later on Friday

This is what the equity curve looks like since 1960:

Performance in the new millennium has been good, while it was pretty poor before that. The average gain has been 0.2, approximately the same as any random week.

The Easter holiday week performance

The stock market tends to perform pretty well during Holidays. How do stocks perform during the Easter holiday week?

We backtest the following strategy:

• We buy at the close on the Friday before Easter holiday week (the Friday one week before Good Friday)
• We exit at the close of Holy Thursday four trading days later

The result can be seen in the curve below:

As you can see, stocks perform very well during the Easter holiday: the average gain per trade is a solid 0.7% over the 63-year period, and it has been 1.49% since the year 2000. Losses are relatively small while the gains tend to be bigger.

Holiday effects in the stock market

We have covered all the US stock market holiday effects in trading.

The Easter holiday effect in trading

Our backtests reveal that the Easter holiday effect has a pretty strong positive bias or seasonality. Holy Thursday is particularly strong—probably one of the best trading days of the year.

FAQ:

What is the significance of Easter in the context of financial markets?

Easter has discernible impact on market volatility and liquidity; trading volumes tend to decrease or increase around the Easter holiday, and how this may affect price movements. Easter, a Christian holiday symbolizing the resurrection of Jesus Christ, might influence investor sentiment and trading patterns on U.S. stock exchanges and financial markets.

Are there other holiday effects in the U.S. stock market?

Various holiday effects in the U.S. stock market, providing links to specific articles on Martin Luther King Jr. Day, President’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, Black Friday, and the End of the Year Rally, showcasing the diverse influences on market behavior.

How does the Easter holiday effect contribute to stock market seasonality?

The Easter holiday effect contributes to stock market seasonality, emphasizing its role in creating a positive bias over the 63-year period and particularly since the year 2000. Provide insights into the reasons behind the observed seasonality, such as investor behavior and market sentiment during the Easter holiday.