A Careful Re-Examination of Seasonality in International Stock Markets: Comment on Sentiment and Stock Returns

58 Pages Posted: 11 Aug 2011 Last revised: 10 Oct 2011

Mark J. Kamstra

York University - Schulich School of Business; Rady School of Management

Lisa A. Kramer

University of Toronto - Rotman School of Management

Maurice D. Levi

University of British Columbia (UBC) - Sauder School of Business

Date Written: October 1, 2011

Abstract

In questioning Kamstra, Kramer, and Levi’s (2003) finding of an economically and statistically significant seasonal affective disorder (SAD) effect, Kelly and Meschke (2010) make errors of commission and omission. They misrepresent their empirical results, claiming that the SAD effect arises due to a "mechanically induced" effect that is non-existent, labeling the SAD effect a "turn-of-year" effect (when in fact their models and ours separately control for turn-of-year effects), and ignoring coefficient-estimate patterns that strongly support the SAD effect. Our analysis of their data shows, even using their low-power statistical tests, there is significant international evidence supporting the SAD effect. Employing modern, panel/time-series statistical methods strengthens the case dramatically. Additionally, Kelly and Meschke represent the finance, psychology, and medical literatures in misleading ways, describing some findings as opposite to those reported by the researchers themselves, and choosing selective quotes that could easily lead readers to a distorted understanding of these findings.

Keywords: SAD, seasonal affective disorder, seasonal depression, stock market cycles, return seasonality

JEL Classification: G10, G11, G12

Suggested Citation

Kamstra, Mark J. and Kramer, Lisa A. and Levi, Maurice D., A Careful Re-Examination of Seasonality in International Stock Markets: Comment on Sentiment and Stock Returns (October 1, 2011). Rotman School of Management Working Paper No. 1668984. Available at SSRN: https://ssrn.com/abstract=1668984 or http://dx.doi.org/10.2139/ssrn.1668984

Mark J. Kamstra

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Lisa A. Kramer (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-978-2496 (Phone)
416-971-3048 (Fax)

HOME PAGE: http://www.chass.utoronto.ca/~lkramer

Maurice David Levi

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Henry Angus 865
Vancouver BC V6T 1Z2
Canada
604-822-8260 (Phone)
604-822-8521 (Fax)

Paper statistics

Downloads
196
Rank
125,256
Abstract Views
1,270