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Seasonality in the Cross Section of Stock Returns: The International Evidence

Published online by Cambridge University Press:  12 August 2010

Steven L. Heston  and
Ronnie Sadka
Steven L. Heston
Affiliation:
University of Maryland, Smith School of Business, 4447 Van Munching Hall, College Park, MD 20742. sheston@rhsmith.umd.edu.
Ronnie Sadka
Affiliation:
Boston College, Carroll School of Management, 140 Commonwealth Ave., Chestnut Hill, MA 02467. sadka@bc.edu.
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Abstract

This paper studies seasonal predictability in the cross section of international stock returns. Stocks that outperform the domestic market in a particular month continue to outperform the domestic market in that same calendar month for up to 5 years. The pattern appears in Canada, Japan, and 12 European countries. Global trading strategies based on seasonal predictability outperform similar nonseasonal strategies by over 1% per month. Abnormal seasonal returns remain after controlling for size, beta, and value, using global or local risk factors. In addition, the strategies are not highly correlated across countries. This suggests they do not reflect return premiums for systematic global risk.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 45 , Issue 5 , October 2010 , pp. 1133 - 1160
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2010

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