58 Pages Posted: 11 Aug 2011 Last revised: 10 Oct 2011
Date Written: October 1, 2011
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: 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