Seasonal effects of the stock market refer to the tendency for certain periods to gain or lose value historically. For example, a common seasonality is “Sell in May and go away”. Depending on what historical time frame you look and which index, some periods show a “summer slump”. The theory is many investors and traders go on vacation in the summer, so volume is light. They return after the summer and take more action. Testing seasonal effects of markets includes a lot of look-back bias and data mining.
Another seasonal effect is that certain months are worse that others. September is considered negative month on all three of the most popular U.S. stock indexes. To read more on that, see: Using the Month of September to Understand Probability and Expectation
Key words: sell in may and go away, stock market seasons, seasonality