(Gobble, Gobble)

Calendar anomalies are great. All you need to trade them is a reminder in an email app. But because of this, they tend to diminish over time more than other signals. However, they still exist, and it is time to give thanks for a specific one: the Thanksgiving Effect.

The Numbers

Let’s start with the data. Since 1950, the day before Thanksgiving, has averaged a 0.39% return in the S&P 500. That’s more than 13 times the unconditional daily average of 0.030%. It has done even better in the last twenty years when the average pre-Thanksgiving return has been 0.604%.

The returns are also better than for other holidays. Since 2005, the “generic” pre-holiday effect—the average return in the three trading days before all holidays—is only 0.148% (still much better than a normal day’s return). And while the day after Thanksgiving (Friday’s close versus Wednesday’s) isn’t catastrophic, it does tend to give a little back.

The Data in the table above refers to S&P 500 Index daily returns from Yahoo Finance.

It’s a small sample, of course—this won’t impress your statistics teacher—but it’s remarkably consistent. The Wednesday before Thanksgiving remains one of the most reliable single-day edges in U.S. markets.

Why Thanksgiving Is Different

Most holidays are random interruptions in the trading calendar. Thanksgiving isn’t. It lands late in the year, always on a Thursday, and sits at the intersection of two powerful flows: portfolio positioning and consumer spending.

Portfolio managers are halfway into their year-end window dressing. Retail participation spikes as employees check brokerage apps instead of emails. Even the algos seem to ease off. It’s a week where optimism and low volume coexist peacefully.

But there’s more.

A 2020 paper by M. Qadan et al, titled “Everybody Likes Shopping, Including the U.S. Capital Market” (Physica A, 2020), finds that equity markets around Thanksgiving behave differently not just because of the holiday, but because of what comes after it—the shopping season. Qadan shows that stock returns during and immediately after Thanksgiving are positively associated with retail activity, especially the surge in spending over Black Friday and Cyber Monday.

In other words, Thanksgiving isn’t just a calendar quirk—it’s also the market’s biggest pulse check on the U.S. consumer. When people are in stores and checkout carts are full, markets read it as a sign of economic health.

Behavioral Microstructure

The pattern makes sense if you think about psychology.

• Before Thanksgiving: traders expect good retail numbers, low volatility, and cheerful headlines. With few participants and low depth, prices drift upward easily.
• After Thanksgiving: reality intrudes. Volumes pick up, profit-taking begins, and any disappointment in sales data (anecdotal at this time) can reverse the move.

Qadan’s evidence supports this: post-Thanksgiving returns remain modestly positive but less predictable. Markets appear to price in optimism before the shopping starts rather than after.

This fits neatly with what behavioral finance has said for decades: investors don’t respond to data—they respond to mood. And nothing triggers collective optimism like turkey, football, family (or at least some families), and discounts on TVs.

Holiday Effect vs. Shopping Effect

Earlier studies identified the pre-holiday bump as a general phenomenon driven by sentiment and thin trading. But Thanksgiving couples that psychological tailwind with a real economic event: the start of the holiday shopping season.

Most holidays are empty calories; Thanksgiving has substance.

That makes it a holiday where two edges stack:

1. Calendar optimism (the usual pre-holiday drift)
2. Retail optimism (a credible macro signal tied to consumer spending)

Even if each is small, their overlap makes the effect stronger—and more persistent. You could say Thanksgiving is the only holiday anomaly with an actual cash-flow mechanism.

Of course, every edge has a half-life. The shopping link is no longer what it was in the pre-Amazon era. The relationship between retail sentiment and the real economy has blurred. Black Friday has mutated into a month-long marketing campaign, and sales data are available to hedge funds in near real time.

Moreover, with ETFs and futures trading nearly 24/7, “pre-holiday” no longer means what it did when traders wore jackets and went home early. The Thanksgiving drift could easily fade.

Still, Qadan’s result implies that the edge is not purely behavioral. It reflects the underlying linkage between consumption and capital markets—something that algorithms can’t completely arbitrage away.

Trading It (or Not)

If you insist on trading it, the simplest expression is equally the least interesting: long S&P close of Tuesday, exit Wednesday close. That’s the cleanest capture of the pre-Thanksgiving drift. Some versions include a small cap tilt, since smaller stocks historically show stronger pre-holiday moves.

But the more elegant takeaway is conceptual. The Thanksgiving effect shows that edges persist when they align with human behavior rather than merely human calendars. It’s not the Thursday holiday that matters—it’s the collective ritual around it: optimism, shopping, year-end positioning, and a temporary truce in the usual pessimism.

Conclusion

Most anomalies fade because they’re artifacts of measurement or microstructure. Thanksgiving survives because it’s a genuine behavioral seasonality reinforced by economic activity. It’s the one week each year when good cheer, consumer spending, and low liquidity push in the same direction.

The average investor doesn’t need to backtest it to death. The data already say it plainly:

The day before Thanksgiving is much better than an average trading day.

That doesn’t make it a law of nature—but it does make it a nice reminder that some of the market’s oldest edges aren’t mechanical at all. They’re human.

References

Qadan, M., Aharon D. and G. Cohen, 2020, “Everybody Likes Shopping, Including the U.S. Capital Market,” Physica A 551, 124173

Disclaimer

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The S&P 500® Index is designed to measure the performance of the large-cap segment of the US equity market. It is float-adjusted market capitalization weighted. Any reference to or definition of the S&P 500 within this material is provided solely for informational and illustrative purposes.