Money Mysteries
Case 001: Ghost Month

Written by: Earl James Enriquez

UP JFA Pisopedia
3 min readNov 10, 2022


The “Ghost Month”

Have you heard of the term “ghost month”? Perhaps you encountered it while watching horror movies or discussing Halloween with your friends. But for people in finance, they'd say it's in August. Historically, August provided the lowest returns in many stock market indices. For example, S&P 500 - the popular stock market index in the US – reported that it has always been negative during August since 1990. On average, it was down 4.6%, which was lower than in other months. Locally, the Philippine Stock Exchange index was negative for half of the past ten years, with the lowest being down 8.6% in August 2013. Perhaps these events are influenced by investors being extra careful with financial decisions during the month. To help us understand this situation better, let’s delve into market psychology.

Fun fact: A popular view is that “Ghost Month” originated from Chinese culture, wherein people believe that the spirits of the dead come to visit their relatives and friends. As a result, people avoid activities that may upset such spirits, such as starting a new business or traveling. The effects of such activities carry over to the financial markets, as investments in stocks and business ventures are usually postponed.

Image taken from Yahoo News

What is Market Psychology?

Market psychology describes the dominant behaviors and confidence levels of investors at a certain point in time. Generally, the mood of an investor is affected by emotions like fear, excitement, and greed. For example, someone might feel a “fear of missing out” or FOMO upon hearing of the big returns of a friend and hurriedly want to invest. Similarly, market sentiment is influenced by stuff like surprising company disclosures and economic downturns like the Covid-19 pandemic. Two terms improve the understanding of market psychology, “bearish markets” and “bullish markets.” Financial reports commonly use those terms to measure market sentiment and predict beneficial investment strategies, making aggregate information easier to understand for readers. A bullish market refers to favorable economic conditions like increased consumer spending, and investors investing more aggressively. Investors believe that the strong performance will likely continue, leading to an increase in the number of buyers. In contrast, a bearish market refers to unfavorable market conditions like a severe calamity or high unemployment rates. Investors are more conservative, and there are generally more sellers than buyers. Such factors are part of a process called fundamental analysis, wherein an investor thoroughly analyzes a company and its environment to determine its stock’s intrinsic value. Stay tuned as Pisopedia will provide more insights on fundamental analysis in the future!

Making the Most of Ghost Month

So, what should you do to succeed during ghost month? Although the experience of each investor is different, there are some general tips that experienced investors agree on. First, ghost month could be a good opportunity to invest in the stock market. Given the low investor confidence during the period, the prices of individual stocks tend to be lower. Following the principle of “buy low, sell high,” investing in stocks during ghost month can bring gains as stock prices could rise in the following months. Alternatively, one good investment during ghost month is a personal emergency fund. With people spending less during this period, the savings can instead be used to prepare for emergencies like health problems. A good option for the emergency fund is depositing the money in a high-interest savings account, as such accounts are easy to access. Lastly, we recommended you avoid incurring debts and unnecessary expenses during ghost month. Outside ghost month, other beliefs might affect investors too. For example, some investors perceive 13 as unlucky and try to limit associating with it.

Although these beliefs are not applicable in all scenarios, it is worthwhile knowing the significance behind these traditions. They inevitably affect investor habits, so mastering them is a good step toward becoming a successful investor or finance professional.



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