October is a unique month. In the west, October is a transitional month, autumn sliding relentlessly towards winter. It also boasts the only holiday where people are encouraged to dress up, scare each other and extort candy with threats of mischief. October has a special place in finance, known as the October effect. and is one of the most feared months in the financial calendar. In this article we’ll look at whether there’s any merit behind this fear.

The events that have given October a bad name span 80 years. They are:

• The Panic of 1907 (October 1907)

A financial panic threatened to engulf Wall Street, mostly owing to threats of legislative action against trusts and shrinking credit. There were multiple bank runs and heavy panic selling at the stock exchange. All that stood between the U.S. and a serious crash was a J.P. Morgan led consortium that did the work of the Fed before the Fed existed.

Taking the Blame for September

Oddly enough, September, not October, has more historical down markets. More importantly, the catalysts that set off both the 1929 crash and the 1907 panic happened in September or earlier and the reaction was simply delayed. In 1907, the panic nearly occurred in March and, with the tension building over the fate of trusts, could have happened in almost any month. The 1929 Crash arguably began when the Fed banned margin-trading loans in February and cranked up interest rates.

September has its share of Black Days, too:

• Black Friday

The original Black Day, Black Friday (1869), was in September. Jay Gould and other speculators tried to corner the gold market, working with an insider at the Treasury. The price kept rising until the Treasury broke the corner by selling $5 million in gold, dropping the price of gold by $25 in a single day and ruining many speculators.

Taken as a whole, a very strong argument can be made for September being worse for the markets than October.

An Angel in Disguise?