Journal of Economics and Finance

, Volume 43, Issue 1, pp 91–103 | Cite as

Does the strength of capital market anomalies exhibit seasonal patterns?

  • Benjamin R. AuerEmail author


In a recent study, Fiore and Saha (Financ Rev 50(2), 257–273 2015) present the interesting finding that the beta anomaly in US stocks appears only in summer months. Using a novel dataset of arbitrage portfolio returns exploiting size, value, momentum and beta effects in 21 developed stock markets, we analyse whether summer-winter seasonality also occurs for other well-known anomalies and for markets other than the US. In a variety of dummy regression settings, we find that, on a descriptive basis, the returns for the size and value (momentum and beta) anomalies tend to be higher in winter (summer) than in summer (winter). However, in the majority of cases, these results do not withstand statistical testing. Furthermore and in contrast to Fiore and Saha (Financ Rev 50(2), 257–273 2015), our results indicate that the beta anomaly is valuable for investors in both summer and winter and thus disinvesting in winter should not be the preferred investment strategy. With the exception of the size portfolios, where returns appear to be concentrated in January, the economic significance of the other arbitrage portfolios’ summer and winter returns mostly also advises against seasonal investing in arbitrage portfolios.


Capital market anomalies Monthly seasonality Dummy regression 

JEL Classification

G14 G15 



We are indebted to two anonymous reviewers for insightful comments and suggestions. We also thank Marc Lorenz for valuable research support.


  1. Ang A, Hodrick R, Xing Y, Zhang X (2006) The cross-section of volatility and expected returns. J Financ 61(1):259–299Google Scholar
  2. Ang A, Hodrick R, Xing Y, Zhang X (2009) High idiosyncratic volatility and low returns: International and further U.S. evidence. J Financ Econ 91(1):1–23Google Scholar
  3. Annaert J, De Ceuster M, Verstegen K (2013) Are extreme returns priced in the stock market? European evidence. J Bank Financ 37(9):3401–3411Google Scholar
  4. Asness C, Frazzini A (2013) The devil in HML’s details. J Portf Manag 39 (4):49–68Google Scholar
  5. Asness C, Frazzini A, Pedersen L (2014) Quality minus junk, Unpublished Manuscript, AQR Capital Management, GreenwichGoogle Scholar
  6. Athanassakos G (2010) Seasonality in value vs. growth stock returns and the value premium. Journal of Financial and Economic Practice 10(2):71–94Google Scholar
  7. Auer B (2018) Are standard asset pricing factors long-range dependent? J Econ Financ 42(1):66–88Google Scholar
  8. Baker M, Bradley B, Wurgler J (2011) Benchmarks as limits to arbitrage: Understanding the low-volatility anomaly. Financ Anal J 67(1):40–54Google Scholar
  9. Bali T, Mo H, Tang Y (2008) The role of autoregressive conditional skewness and kurtosis in the estimation of conditional VaR. J Bank Financ 32(2):269–282Google Scholar
  10. Bali T, Cakici N, Whitelaw R (2011) Maxing out: Stocks as lotteries and the cross-section of expected returns. J Financ Econ 99(2):427–446Google Scholar
  11. Barberis N, Huang M (2008) Stocks as lotteries: The implications of probability weighting for security prices. Am Econ Rev 98(5):2066–2100Google Scholar
  12. Belsley D, Kuh E, Welsch R (1980) Regression diagnostics: Identifying influential data and sources of collinearity. Wiley, New YorkGoogle Scholar
  13. Bollerslev T (1986) Generalized autoregressive conditional heteroskedasticity. J Econ 31(3):307–327Google Scholar
  14. Bollerslev T, Wooldridge J (1992) Quasi-maximum likelihood estimation and inference in dynamic models with time-varying covariances. Econ Rev 11(2):143–172Google Scholar
  15. Bonin J, Moses E (1974) Seasonal variations in prices of individual Dow Jones Industrial stocks. J Financ Quant Anal 9(6):963–991Google Scholar
  16. Bouman S, Jacobsen B (2002) The Halloween indicator, “Sell in May and Go Away”: Another puzzle. Am Econ Rev 92(5):1618–1635Google Scholar
  17. Cadsby C (1992) Turn-of-month and pre-holiday effects on stock returns: Some international evidence. J Bank Financ 16(3):497–509Google Scholar
  18. Cao M, Wei J (2005) Stock market returns: A note on temperature anomaly. J Bank Financ 29(6):1559–1573Google Scholar
  19. Chordia T, Subrahmanyam A, Tong Q (2014) Have capital market anomalies attenuated in the recent era of high liquidity and trading activitiy? J Account Econ 58(1):41–58Google Scholar
  20. Cont R (2001) Empirical properties of asset returns: Stylized facts and statistical issues. Quant Finan 1(2):223–236Google Scholar
  21. Corhay A, Hawawini G, Michel P (1987) Seasonality in the risk-return relationship: Some international evidence. J Financ 42(1):49–68Google Scholar
  22. Daniel K, Moskowitz T (2016) Momentum crashes. J Financ Econ 122 (2):221–247Google Scholar
  23. Das P, Rao S (2012) Is the value effect seasonal? Evidence from global equity markets. International Journal of Business and Finance Research 6(2):21–33Google Scholar
  24. Degenhardt T, Auer B (2018) The ‘Sell in May’ effect: A review and new empirical evidence. North American Journal of Economics and Finance 43:169–205Google Scholar
  25. Dichtl H, Drobetz W (2015) Sell in May and go away: Still good advice for investors? Int Rev Financ Anal 38:29–43Google Scholar
  26. Dutt T (2013) Stock return volatility, operating performance and stock returns: International evidence on drivers of the ‘low volatility’ anomaly. J Bank Financ 37 (3):999–1017Google Scholar
  27. Fama E (1991) Efficient capital markets: II. J Financ 46(5):1575–1617Google Scholar
  28. Fama E, French K (1992) The cross-section of expected stock returns. J Financ 47(2):427–465Google Scholar
  29. Fama E, French K (1993) Common risk factors in the returns on stocks and bonds. J Financ Econ 33(1): 3–56Google Scholar
  30. Fama E, French K (1996) Multifactor explanations of asset pricing anomalies. J Financ 51(1):55–84Google Scholar
  31. Fama E, French K (2008) Dissecting anomalies. J Financ 63(4):1653–1678Google Scholar
  32. Fama E, French K (2012) Size, value, and momentum in international stock returns. J Financ Econ 105(3):457–472Google Scholar
  33. Fiore C, Saha A (2015) A tale of two anomalies: Higher returns of low-risk stocks and return seasonality. Financ Rev 50(2):257–273Google Scholar
  34. Frazzini A, Pedersen L (2014) Betting against beta. J Financ Econ 111 (1):1–25Google Scholar
  35. Galai K, Kedar-Levy H, Schreiber B (2008) Seasonality in outliers of daily stock returns: A tail that wags the dog? Int Rev Financ Anal 17(5):784–792Google Scholar
  36. Goyal P (2012) Empirical cross-sectional asset pricing: A survey. Fin Mkts Portfolio Mgmt 26(1):3–38Google Scholar
  37. Haggard K, Witte H (2010) The Halloween effect: Trick or treat? Int Rev Financ Anal 19(5):379–387Google Scholar
  38. Hardy M (1993) Regression with dummy variables. SAGE Publications, Newbury ParkGoogle Scholar
  39. Harvey C, Liu Y, Zhu H (2016) ... and the cross-section of expected returns. Rev Financ Stud 29(1):5–68Google Scholar
  40. Heston S, Sadka R (2008) Seasonality in the cross-section of stock returns. J Financ Econ 87(2):418–445Google Scholar
  41. Hirshleifer D, Jiang D, Meng Y (2016) Mood beta and seasonalities in stock returns, Unpublished Manuscript, University of CaliforniaGoogle Scholar
  42. Huber P (1973) Robust regression: Asymptotics, conjectures and Monte Carlo. Ann Stat 1(5):799–821Google Scholar
  43. Jacobs H (2015) What explains the dynamics of 100 anomalies? J Bank Financ 57:65–85Google Scholar
  44. Jacobsen B, Mamun A, Visaltanachoti N (2005) Seasonal, size and value anomalies, Unpublished Manuscript, Massey UniversityGoogle Scholar
  45. Jacobsen B, Visaltanachoti N (2009) The Halloween effect in U.S. sectors. Financ Rev 44(3):437–459Google Scholar
  46. Jensen M (1967) Random walks: Reality or myth - comment. Financ Anal J 23(6):77–85Google Scholar
  47. Ji X, Giannikos C (2010) The profitability, seasonality and source of industry momentum. Appl Financ Econ 20(17):1337–1349Google Scholar
  48. Johnston K, Cox D (1996) Tax loss selling and the contrarian investment strategy. J Econ Financ 20(2):87–94Google Scholar
  49. Kamstra M, Kramer L, Levi M (2003) Winter blues: A SAD stock market cycle. Am Econ Rev 93(1):324–343Google Scholar
  50. Kumar A (2009) Who gambles in the stock market? J Financ 64(4):1889–1933Google Scholar
  51. Larsen G (1992) Seasonality in firm-size portfolio returns: A nonparametric analysis. J Econ Financ 16(3):121–130Google Scholar
  52. Lean H (2011) The Halloween puzzle in selected Asian stock markets. International Journal of Economics and Management 5(1):216–225Google Scholar
  53. Lee C, Rahman S (1990) Market timing, selectivity and mutual fund performance: An empirical investigation. J Bus 63(2):261–278Google Scholar
  54. Liew J, Vassalou M (2000) Can book-to-market, size and momentum be risk factors that predict economic growth? J Financ Econ 57(2):221–245Google Scholar
  55. Lucey B (2004) Robust estimates of daily seasonality in the Irish equity market. Appl Financ Econ 14(7):517–523Google Scholar
  56. Lucey B, Tully E (2006) Seasonality, risk and return in daily COMEX gold and silver data 1982–2002. Appl Financ Econ 16(4):319–333Google Scholar
  57. Lucey B, Zhao S (2008) Halloween or January? Yet another puzzle. Int Rev Financ Anal 17(5):1055–1069Google Scholar
  58. Matallín-Sáez J (2006) Seasonality, market timing and performance among benchmarks and mutual fund evaluation. Journal of Business Finance and Accounting 33(9-10):1484–1507Google Scholar
  59. McLean R, Pontiff J (2016) Does academic research destroy stock return predictability? J Financ 71(1):5–32Google Scholar
  60. Mitton T, Vorkink K (2007) Equilibrium underdiversification and preference for skewness. Rev Financ Stud 20(4):1255–1288Google Scholar
  61. Moller N, Zilca S (2008) The evolution of the January effect. J Bank Financ 32(3):447–457Google Scholar
  62. Peiró A. (1994) The distribution of stock returns: International evidence. Appl Financ Econ 4(6):431–439Google Scholar
  63. Petkova R (2006) Do the Fama-French factors proxy for innovations in predictive variables? J Financ 61(2):581–612Google Scholar
  64. Subrahmanyam A (2010) The cross-section of expected stock returns: What have we learned from the past twenty-five years of research? European Financial Management 16(1):27–42Google Scholar
  65. van Dijk M (2011) Is size dead? A review of the size effect in equity returns. J Bank Financ 35(12):3263–3274Google Scholar
  66. Yao Y (2012) Momentum, contrarian, and the January seasonality. J Bank Financ 36(10):2757–2769Google Scholar
  67. Zhang C, Jacobsen B (2013) Are monthly seasonals real? A three century perspective. Review of Finance 17(5):1743–1785Google Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of FinanceUniversity of LeipzigLeipzigGermany
  2. 2.Research Network Area Macro, Money and International FinanceCESifo MunichMunichGermany

Personalised recommendations