Mood Beta and Seasonalities in Stock Returns
63 Pages Posted: 7 Dec 2016 Last revised: 14 Jul 2020
Date Written: August 14, 2019
Existing research has documented cross-sectional seasonality of stock returns—the periodic outperformance of certain stocks during the same calendar months or weekdays. We hypothesize that assets’ different sensitivities to investor mood explain these effects and imply other seasonalities. Consistent with our hypotheses, relative performance across individual stocks or stock portfolios during past high or low mood months and weekdays tends to recur in periods with congruent mood and reverse in periods with noncongruent mood. Furthermore, assets with higher sensitivities to aggregate mood—higher mood betas—subsequently earn higher returns during ascending mood periods and lower returns during descending mood periods.
Keywords: Return seasonality, Investor mood, Mood beta, Market efficiency, Anomalies
JEL Classification: G02, G11, G12, G14
Suggested Citation: Suggested Citation