Can You Make Money In Stocks On Leap Day? (DIA)

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2012 is a Leap Year and that means one more potential trading day with February 29 on the calendar.  Stock market statisticians often try to look for patterns in anything, so 24/7 Wall St. wanted to know one question: What happens statistically to the stock market on Leap Day? 

To keep things consistent, we evaluated the trading day after February 28 of each year and we looked simply at the price change on the Dow Jones Industrial Average on February 29 or the following day if February 29 took place on a weekend.  We evaluated each Leap Year going all the way back to 1960 to get 13 different Leap Year comparisons.  Of these 13 cycles, only 2 of the trading days had a price change of more than 2% (2008 and 1988) and only one more Leap Day (1980) had a price change of 1%.

The two big standouts were in 2008 and in 1988, and both seem easy enough to explain fundamentally.  In the weeks before Leap Day of 2008, the DJIA had fallen from 14,000 in late 2007 to about 12,000 by early 2008.  The recession was just gathering steam and ultimately the market was almost cut in half yet again over the following 11 months.  If you think back to 1988, the market was just recovering from Black Monday in October 1987 when the DJIA fell 507 points or 22.6% in a single trading day.

What is interesting is that there really appears to be a lack of volatility outside of the two ‘exceptional Leap Years’ going all the way back to 1960.  The correlation through time back to 1960 is that 5 of the 13 trading sessions in Leap Years ended up as losing days on Leap Day or the day after the Feb. 28 trading day.  That translates to a 61.5% chance that the DJIA would be up on the Leap Day trading.  If you took only the trailing ten Leap Years, there is a 70% chance that the DJIA would close higher.

After tallying up every Leap Year and not excluding the outlier years, the average comes to a gain of only 0.19% on Leap Day.  One other consistency for the DJIA on Leap Day is that going back to 1960 there have not been two Leap Day losses in a row.  Does that assure a small gain for investors who buy the SPDR Dow Jones Industrial Average (NYSE: DIA) on February 29, 2012 if they bought at the close of February 28, 2012? If it does, the move is likely too small to merit much of a statistical bet when you consider commissions.

Here are the trading days accounting for the Leap Days going back to 1960 and it shows the closing prices and the gain or loss on each:

Feb 29, 2008.. 12,266.39 for a loss of -2.50%
Feb 28, 2008.. 12,582.18

Mar 01, 2004.. 10,678.14 for a gain of 0.89%
Feb 27, 2004.. 10,583.92

Feb 29, 2000.. 10,128.31 for a gain of 0.89%
Feb 28, 2000.. 10,038.65

Feb 29, 1996.. 5,485.62 for a loss of -0.37%
Feb 28, 1996.. 5,506.21

Mar 02, 1992.. 3,275.27 for a gain of 0.23%
Feb 28, 1992.. 3,267.67

Feb 29, 1988.. 2,071.62 for a gain of 2.39%
Feb 26, 1988.. 2,023.21

Feb 29, 1984.. 1,154.63 for a loss of -0.21%
Feb 28, 1984.. 1,157.14

Feb 29, 1980.. 863.14 for a gain of 1.01%
Feb 28, 1980.. 854.44

Mar 01, 1976.. 975.36 for a gain of 0.28%
Feb 27, 1976.. 972.61

Feb 29, 1972.. 928.13 for a gain of 0.41%
Feb 28, 1972.. 924.29

Feb 29, 1968.. 840.50 for a loss of -0.49%
Feb 28, 1968.. 844.72

Mar 02, 1964.. 802.75 for a 0.32% gain
Feb 28, 1964.. 800.14

Feb 29, 1960.. 630.12 for a loss of -0.29%
Feb 26, 1960.. 632.00

JON C. OGG

DJIA closing prices from Yahoo! Finance.

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