Last Updated on June 19, 2022 by Quantified Trading
George Washington’s Day/Presidents’ Day is one of the federal holidays in the US. But does it affect the US stock market?
The US financial markets do not open on George Washington’s Day or Presidents’ Day. Trading does not take place on any of the U.S. stock exchanges. Backtests determine that trading around this holiday is pretty random.
George Washington Day/Presidents’ Day holiday
Officially known as Washington’s Day, Presidents’ Day is a federal holiday in the United States. It is celebrated on the third Monday in February to honor George Washington and Abraham Lincoln. Sometimes, the holiday is taken as a celebration of the birthdays and lives of all U.S. presidents.
Why do we celebrate it?
Presidents’ Day is celebrated to honor the birthdays of both George Washington (February 22) and Lincoln (February 12). The third Monday in February is chosen because it falls between the two birthdays and it offers workers a long weekend of rest.
When did we start celebrating it?
Presidents’ Day celebration started in the 1800s. After the death of George Washington in 1799, his birthday (February 22) became a perennial day of remembrance. But it remained an unofficial observance until 1879 when President Rutherford B. Hayes signed it into law.
The holiday initially only applied to the District of Columbia but was expanded to the whole country in 1885. In 1968, Congress passed the Uniform Monday Holiday Bill, which moved a number of federal holidays to Mondays, and the third Monday of February was chosen to celebrate Washington and Lincoln.
Is it a nontrading day?
Yes, it is a nontrading day: the U.S. financial markets always close for the Presidents’ Day celebration. Trading does not take place on the New York Stock Exchange or Nasdaq until those exchanges reopen on Tuesday, following the three-day break — weekend and Presidents’ Day on Monday.
George Washington Day/President’s Day holiday effect (backtest)
The second holiday of the year is President’s Day, officially called Washington’s Birthday, and is always on the third Monday in February. As with Martin Luther King Day, the February holiday falls between the calendar day 15 to 21.
We test the holiday effect in February this way:
- We go long at the close on the first calendar day of the month which is higher than 11.
- We exit at the calendar day 21 or more.
On the ETF with the ticker code SPY we get this equity curve:
The holiday effect is absent in February. There are 29 trades, the average gain is -0.24%, the win ratio is 52%, the profit factor is 0.77, and the max drawdown is 9%.