An Empirical Analysis of Factor Seasonalities

Abstract

Seasonalities in asset returns, including the January effect, the Halloween effect and the same-calendar-month effect, are widely documented in the literature. We show that a number of popular factors in the empirical asset pricing literature exhibit some well-known seasonalities. Most of the factor models we consider are able to effectively capture seasonalities in the returns of our test portfolios. Carhart four-factor performs the best in terms of explaining the seasonalities of underlying markets. It is the first attempt to empirically test Keloharju et al. (2016) hypothesis and extend it to compare asset pricing models.

Keywords: Asset pricing factors; Return seasonality; January effect; Halloween effect; Same calendar month effect

JEL Classification: G14, G31, G32, M41, M42