Pre-Holiday Effect

The three-gate gauntlet · genuine only if it clears all three and survives adversarial refutation

Gate 1

Survivorship-free

n/a

not a factor universe

Gate 2

Placebo ≥ P95

not run

Gate 3

Cost-aware net

RF +1.99

positive, not certified

Failedfailed refutation

Worst 12-month leg (RF)-0.74

−1.00 floor0

Every strategy here — winners included — loses in its worst 12 months. Depth is honest context, not the verdict.

Did not clear our screen — no tradeable net edge survived modelled costs.

The pre-holiday effect is the observation that stock index returns tend to be higher on the trading days immediately before public holidays. It is a calendar seasonality, not a signal derived from price or fundamentals.

What we found

The pre-holiday drift is real in our test and survives 1.5x modelled cost stress, so the seasonal pattern itself is not a data artefact. But the economic size is negligible: measured over roughly 22 years it accumulates too little to matter, and the worst-year risk-adjusted RF is -0.74, meaning it has losing years. This is why it fails — a genuine but tiny calendar quirk, not a strategy you can trade on its own.

How we tested it

2005–2026 test windowmodelled liquidity-aware costssurvivorship na

Tested on the index (e.g. SPY), daily. Realistic modelled costs.
Placebo / robustness test: real result vs random baskets or shuffled signals (real vs the 95th percentile of random)

Source: Ariel (1990), "High Stock Returns Before Holidays", J. Finance; Lakonishok & Smidt (1988)
Read the paper ↗

← The Academic Audit — all 54 studies

Research, not investment advice. “Validated” factor-legs are market-neutral diversifying building blocks with a losing worst year — none is a standalone tradeable strategy. Metrics are cost-aware and modelled (not live fills); the 2005–2026 test window is out-of-sample versus the source paper. Dollar figures are not returns and are omitted by design.