Long Live Hermes! Mercury Retrograde and Equity Prices

Astrology suggests that Mercury Retrograde adversely affects financial gain. We study the effect of Mercury Retrograde on equity prices. By using 48 countries’ stock market indices, we find that stock market returns are 3.33% lower annually during Mercury Retrograde periods than in other periods. To explain this effect, we propose an investor belief channel: investors who hold an astrological belief that Mercury Retrograde can negatively affect their financial gain will stay away from the market. This belief results in a higher risk premium required by the remaining investors to share more risk. We further confirm that ancient Greek culture is the source of investors’ astrological belief in Mercury Retrograde. Consistent with the belief’s predictions, we find low trading volume, market underreaction to news, and a high price of risk but no change in the level of market risk and investor sentiment during Mercury Retrograde periods