8 Investing Terms Perfect for Halloween

This Halloween, don't get spooked. (Although maybe that's easier said than done when it comes to certain language in the world of finance!) Here are eight investing concepts with spooky names that are perfectly suited to the Halloween season:

Halloween Effect: Historically, stock markets have tended to show greater strength during the November through April period, which is where this term — also known as "Sell in May and Go Away" — comes from. The idea behind this seasonal phenomenon is that investors jump back into the markets at the end of October after a summer of vacationing.

Winner's Curse: Simply put, this concept has to do with overpaying for an auctioned item as a result of having incomplete information. It's said to have started with companies over-bidding for offshore oil drilling rights. Because value can be vague and subjective in a situation where there are many eager buyers and potentially high emotions, a successful bidder may overshoot the true value of an item. A prime example in the finance world could be initial public offerings (IPOs). Since there's no set market price for the stock in an IPO, investors need to estimate market value, which could lead to stock purchases being above the fair value.

Dark Pools: These are private exchanges that have been around since the 1980s. They're largely used by institutional investors for trading big blocks of securities without causing major prices fluctuations. For example, if an investor wanted to buy 1 million shares of a company on the open market, the sharp increase in demand would likely cause prices to spike. Dark pools only display trading data after a trade has happened. The name is related to that overall lack of transparency.

Witching Hours: Double, triple or quadruple witching happens when groups of financial contracts, typically options and futures, expire on the same day and the same time. The simultaneous expirations happen in the final trading hour of stock-market sessions on the third Friday of March, June, September and December and can cause a spike in trading activity as positions are adjusted.

Unknown, Unknowns: The term originated with former United States Secretary of Defense Donald Rumsfeld when he said, "... there are also unknown unknowns — things we don't know we don't know." In investing, "unknown unknowns" are unprovable beliefs that are based on a lack of understanding, insufficient data or other unknowable elements.

Phantom Stock: This is a type of deferred employee compensation plan that can allow employees to benefit from a company's share-price appreciation without holding actual shares. Rather than a company issuing stock, an employee is granted so-called phantom shares and would be compensated with profits made on any stock appreciation at a future date. By not issuing new shares, a company avoids any dilution in share price for existing shareholders. Phantom shares track the market price of the real shares.

October Effect: Let's face it, if we comb through the history books, the month of October hasn't been all that kind to financial markets. The first major stock market crash in 1929 happened in October, as did 1987's "Black Monday," which has become known as the worst single-day loss in U.S. history as a result of the Dow Jones Industrial Average's nearly 23 per cent plummet. October Effect is the theory that markets tend to fall in October, based on the psychological effects of the historical crashes. Experts who have dug deeper say the numbers don't actually support the theory.

Tail Risk: This is the risk that some event — either very good or very bad — is possible, though unlikely. The term comes from the shape of a bell curve where most outcomes clump in the middle bulge and each end tapers off into tails, representing a slimmer possibility an event will occur.