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Do the data back up the "Santa Claus rally" phenomenon that we always hear about this time of year, or is it just another Wall Street myth?

For almost as long as stock markets have been in existence, people have tried to identify and capitalize on seasonal patterns in the data. There's the "sell in May and go away" strategy, for example, and the presidential election cycle theory. You can find studies supporting these hypotheses and others debunking them.

Some theories about the stock market are just plain ridiculous, such as the "Super Bowl indicator" (I won't even dignify it with an explanation) and predictions based on women's skirt lengths (ditto).

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What about December? It makes intuitive sense that stocks would rise when people are in a festive mood. And, looking at the historical data, it certainly seems like there is something special about the holiday season.

For the three decades from 1987 through 2016, December has been the best month for stocks on the S&P 500 – and by a comfortable margin. There were 24 December advances and just six declines over that 30-year period, and the average December return – excluding dividends – was 1.85 per cent. That's about three times as high as the average return of 0.62 per cent for all months.

The worst month was August, with 16 gains, 14 losses and an average return of negative 1.01 per cent. (I obtained these results from the monthly market returns calculator at moneychimp.com.)

Canadian stocks have performed even better in December. Over the past 30 years, the S&P/TSX composite index has posted an average December return of 2.02 per cent. So far this December, it's up about 0.2 per cent.

Lots of explanations have been offered for December's outperformance.

Apart from holiday cheer that could trigger stock buying, another possible factor are the year-end bonuses handed out on Wall and Bay streets. As the theory goes, some of this money is plowed into stocks, pushing prices higher.

Still another explanation involves tax-loss selling. Investors typically dump their worst-performing stocks in October and November to generate losses for tax purposes, and this sets up the market for a rebound in December.

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Yet another explanation is year-end "window dressing" by fund managers, who load up on winning stocks at the end of a quarter to make their portfolios look good. Or, perhaps the Santa Claus rally is just a self-fulfilling prophecy: People expect the market to rise, so they buy stocks, and the market rises.

But none of these explanations answers the central question: Is the Santa Claus rally even real?

To find out, I called the University of Toronto's department of statistical sciences, which put me in touch with a master's student named Brigid Cami.

I provided Ms. Cami with 30 years of S&P 500 returns broken down by month, and she put the numbers through several statistical tests to determine whether December's performance was statistically different from that of other months, or if the returns could be explained simply by chance – like a quarter that comes up heads a bunch of times in a row.

She had some bad news for fans of the fat guy in the red suit.

"In all cases there is no evidence that the December average is statistically different from the other months," she said. "All of the tests had the same conclusion and it was a pretty strong conclusion."

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What's more, there was no evidence that any month was statistically better – or worse – than any other month, she said.

However, Ms. Cami did find that December was special in one regard: The variance – or spread – of returns was smaller than other months, meaning December's returns are more concentrated near the mean.

Specifically, her tests revealed "strong evidence to suggest that the variance of December is smaller than that of September" and "very strong evidence" that December's variance is smaller than October's. There is also evidence, although not as strong, that December's variance is smaller than that of August.

However, there was no evidence that the variance of December's returns is different from the other eight months.

Bottom line: It's time to stop believing in the Santa Claus rally.

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