Covering-Up When the Tide Goes Out? Momentum Seasonality and Investor Preferences
52 Pages Posted: 8 May 2015 Last revised: 30 Jul 2015
Date Written: July 29, 2015
Abstract
We use the seasonal patterns in momentum returns to provide insight into investor preferences. We find the momentum factor return is much greater prior to the calendar quarter-end, especially after a stock market decline. This pattern holds more strongly for larger stocks, for both winners and losers, for the US and internationally, and especially in recent years. The established year-end seasonality is consistent with the quarterly pattern, rather than tax-loss selling. The time-series momentum of markets follows the same pattern, primarily after a market decline. The patterns imply investors prefer well-performing stocks/markets at the quarter-end, particularly in a declining market.
Keywords: Momentum, Seasonality, Time-Series Predictability
JEL Classification: G12, G02
Suggested Citation: Suggested Citation