Are Seasonal Anomalies Real? A Ninety-Year Perspective

Abstract

This study uses 90 years of daily data on the Dow Jones Industrial Average to testfor the existence of persistent seasonal patterns in the rates of return. Methodological issues regarding seasonality tests are considered. Wefind evidence of persistently anomalous returns around the turn of the week, around the turn of the month, around the turn of the year, and around holidays. In recent years there has been a proliferation of empirical studies documenting unexpected or anomalous regularities in security rates of return. In addition to the widely studied relation between firm size and rate of return,1 these include seasonal regularities related to the time of the day [Harris (1986)], the day of the week [see Ball and Bowers (1986), Cross (1973), French (1980), Gibbons and Hess (1981), Jaffe and Westerfield (1985), Keim and Stambaugh (1984), and Lakonishok and Levi (1982)], the time of the month [Ariel (1987)], and the turn of the year [see Haugen and Lakonishok (1988), Jones, Pearce, and Wilson (1987), Lakonishok This article has been presented at Cornell University,

An Empirical Analysis of Higher Moment Capital Asset Pricing Model for Bangladesh Stock Market

“…The rate of return for each security was calculated as: Return = ln (P t ) -ln (P t-1 ), where P t = closing price at period t; P t-1 = closing price at period t-1and ln = natural log. The company's dividend, bonus and right issues were not adjusted (Lakonishok & Smidt, 1988;Fishe, Gosnell, & Lasser, 1993), logarithm returns were taken (Strong, 1992) and individual securities were used rather than portfolios for the analysis (Kim, 1995;Kaplanski, 2004). For a proxy of the market portfolio, the DSI Index was used and for the proxy of the risk-free asset, Bangladesh government 3-Month T-bill rate was used.…”

Does the day of the week effect exist once transaction costs have been accounted for? Evidence from the UK

“…Mills and Coutts (1995) pointed out the need for new, alternative, models of asset pricing. Lakonishok and Smidt (1988) were the first to draw attention to the fact that it might be wise to adopt a sceptical stance against the existence of anomalies until they have been supported by studies utilising datasets coming from different stock markets over different time periods. As Arsad and Coutts (1997) noted, relatively little research has been undertaken on regularities regarding the UK stock exchange data.…”

An Analysis of Private Investors' Stock Market Return Forecasts

“…More specifically, it has been found that the weekend return (i.e., the return from the close on Friday to the opening on Monday) is lower than the daily returns during the week (Arsad and Coutts 1997, Franses and Paap 2000, French, 1980, Keim and Stambaugh, 1984, Lakonishok and Smidt, 1988, Rogalski, 1984. There have been a variety of (modestly successful) attempts at explaining this phenomenon (e.g.…”