Mercury Retrograde Adversely Affects Stock Returns

Stock market returns are lower during the periods when it appears that Mercury’s rotation is backward than at other times of the year.

Though the relationship between the planet’s position and the performance of equity markets on Earth is not causal, there is a pattern of weaker stock market performance when Mercury is in retrograde.

Mercury normally travels across the sky from west to east; however, around three or four times each year, it appears to travel backward, which is known as Mercury retrograde. In Greek mythology, Mercury symbolizes the god of financial gain, commerce, communication and traffic. Astrologers have thus speculated that Mercury retrograde is bad for stock performance. Some investors are cautious during this time, demanding a higher market risk premium than in other periods.

Researchers gathered historical performance data from 48 countries’ stock market indexes to see if there was any validity to the belief of lower stock returns when Mercury is in retrograde. Data was used from 1973 through 2019. The researchers found that stock market returns are 3.33% lower annually during Mercury retrograde periods.

The study’s authors devised what they call “channels” to help explain this phenomenon: the astrological theory channel and the investor belief channel.

The astrological theory channel supports the notion of Mercury retrograde affecting certain activities. Data on traffic accidents or firm-specific news showed no significant change during such periods relative to non-retrograde periods. Thus, the astrological theory does not hold up.

The premise of the investor belief theory is that if investors believe they will lose money by investing during periods when Mercury is in retrograde, they will refrain from holding investments. The remaining investors demand a higher risk premium as compensation to stay invested. This higher premium lowers stock prices.

Source: “Long Live Hermes! Mercury Retrograde and Equity Prices,” by Yanling Qi, Hang Wang and Bohui Zhang; SSRN, April 2022.