Hey, I’m Greg Rosalsky at Planet Money. Here at the show, we cover the people and forces that shape our economic lives. We've brought you stories that explore the impact of AI, Trump's tariffs and more. Public media is now operating without federal funding. Help us keep bringing you these stories in the new year by supporting the NPR Network today.

Christmas-onomics

by Greg Rosalsky

We’re making a list, we’re fact-checking it twice, we’re gonna find out, um, what economic research says about Christmas. A Planet Money newsletter is coming to town.

Okay, so hopefully the rest of this newsletter is a bit less terrible than that jingle. Today, we’re taking a peek at the literature to find out what economics says about Christmas.

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The Santa Claus Rally

For a long time, economists and stock analysts observed that the stock market tended to do better around Christmas and other holidays. For example, back in 1988, Josef Lakonishok and Seymour Smidt analyzed 90 years of data and found “the preholiday rate of return is 23 times larger than the regular daily rate of return.” Pettengill (1989); Robert Ariel (1990); Brockman and Michayluk (1998); Cao et al (2009), and Bley and Saad (2010) all found a similar historical pattern of the stock market doing better around certain holidays. Wall Street analysts sometimes call stock market surges around Christmas “The Santa Claus Rally” (the term was originally coined by Yale Hirsch, founder of the Stock Trader’s Almanac, back in 1972).

These observations, however, have sparked a debate. Economists who believe in the efficient market hypothesis, which suggests that stock prices reflect all available information and it’s hard to beat the market, have been skeptical. If it were true that the stock market predictably does well around Christmas, then wouldn’t that information cause smart traders to take advantage of it and thereby eliminate that foreseeable pattern? For example, by buying stocks in November and then selling them around Christmas to make easy money. With enough traders doing that, the holiday-time rally would disappear.

Economists and traders have offered various theories for why there might be a Santa Claus Rally. For example, maybe it’s because institutional investors go on vacation, and the market becomes less smart and efficient. Maybe it’s because people invest their holiday bonuses. Maybe it’s because it’s near the end of the year, and people are pursuing schemes to lower their tax bills. Behavioral economists have emphasized that holiday-time psychology can explain why the stock market does better before the holidays. Basically, people are more jolly, and they buy more stocks.

Interestingly, one empirical paper from 2005, by Chong et al, found evidence that, basically, there used to be a Santa Claus Rally, but it had disappeared in the U.S. stock market by the late 1990s. It suggests that, maybe, the news got out about this holiday stock anomaly, and savvy investors took advantage of it enough to the point it’s now gone.

There’s a good chance you won’t be able to make easy money exploiting the Santa Claus Rally. And, it’s worth saying, the typical advice from personal finance advisors is you shouldn’t try and time the market.

Gas prices might actually not surge around the holidays?

Obviously, demand to travel increases during the holiday season. People go see their families or on vacations. So, duh, plane tickets get more expensive — something confirmed by various studies.

But, for some reason, various studies suggest there isn’t a similar holiday effect on gas prices. These findings are a bit strange, because people do drive more, and we haven’t found a definitive explanation for why gas prices wouldn’t surge. It could be because competition and supply and demand dynamics are different in the energy market. And, with gasoline suppliers being able anticipate increased demand during the holidays, they increase supply in anticipation of them. Or maybe these just aren’t great studies. In reviewing this puzzling literature, the economists Laura Birg and Anna Goeddeke write, “The data used in these papers is limited and more research is needed to conclude that no such effect exists.”

So, yeah, it’s a bit of a mystery why gas prices wouldn’t surge during the holidays, and maybe we’ll take a closer look at this story in the future. In the meantime, it’s worth celebrating the fact that this holiday season, gas prices seem to be particularly low.

BRENDAN SMIALOWSKI / Getty Images

Actually, suicides don’t increase during the holidays

There’s a persistent myth that — because of shorter days, cold weather, and the depressingness of the holidays for many people — suicides spike during the holidays. But study after study finds that’s actually not true. If anything, suicides seem to decline during the holidays.

For more than two decades, the University of Pennsylvania Annenberg School of Communication has been tracking the propagation of this myth in the media every holiday season. They recently released their analysis of the 2024-2025 holiday season. They found “19 stories in print media outlets that spread the false myth that suicides increase during the holidays.” Here’s to more fact-checking.

Economists debate whether gift giving is good or bad for the economy

The economist Joel Waldfogel, quite famously, published a paper in 1993 titled, “The Deadweight Loss of Christmas.” Deadweight loss is a term that economists use to mean, basically, something that destroys value in the economy, making society worse off.

“I think some people perceive me as attacking Christmas, which I never meant to,” Waldfogel told Planet Money back in 2010, in an episode titled, “Making Christmas More Joyful, And More Efficient.” He said it was just pointing out “the sloppy way we celebrate it.”

In this paper, Waldfogel argues that gift-giving destroys value because people often buy gifts that other people don't really want or need.

“I can spend $50 and buy something that is worth nothing to you,” Waldfogel said. For example, say that gift was a $50 blender. And then you just throw it in your closet and never use it. It took real resources to make that blender. And “if it generates no use and no satisfaction for anyone, then it’s just pure waste.”

One general takeaway from all this is… it might be better to just give people cash or gift cards.

But some economists disagree with Waldfogel’s analysis, and there’s a debate about whether gift-giving is actually bad for the economy. “The central issue in this debate is whether recipients value the gifts less than, as much as, or more than the givers pay for them,” writes economists Anna Goeddeke and Laura Birg.

Waldfogel may underestimate the fact that gift givers often give things to people that they actually cherish — and often they hadn’t known about the gift or wouldn't have gotten the gift for themselves. Another big thing that Waldfogel undercounts with his analysis is the feeling — or “warm glow” — that people get when they give or receive gifts, which could actually be rather large.

In the years since Waldfogel’s analysis, there have been many more empirical studies on the impact of gift giving, and there still doesn’t seem to be a definitive consensus in this area.

But if you do get someone a gift, maybe put some extra thought into it. It’s not only a bad gift for them. It’s a waste of resources!

It won’t arrive in time for Christmas, but we’re pretty sure the forthcoming Planet Money book is a gift with no deadweight loss. Pre-order it and get a free gift. Details at planetmoneybook.com

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