The Zodiac Calendar and Equity Factor Returns

Abstract

We calculate the returns for four well-known equity factor returns, the market, size, value, and momentum, for each Zodiac calendar year from 1926 to 2015. We find that point estimates of average returns for each Zodiac sign can be substantially different. However, when we employ statistical tests, we do not find enough evidence to reject the null hypothesis of equal excess returns across Zodiac signs. For an investor with an equally-weighted portfolio in these four equity factors, the Year of the Rooster may seem particularly good and the Year of the Ox particularly poor, but also in this case the null hypothesis cannot be rejected. Hence, we conclude that investment strategies based on Zodiac signs are unlikely to generate superior returns.

Keywords: Calendar Effects, Factor investing, Stock market returns, Zodiac calendar

JEL Classification: G11, G12, G14