When Low Beats High: Riding the Sales Seasonality Premium

59 Pages Posted: 21 May 2018 Last revised: 27 May 2018

See all articles by Gustavo Grullon

Gustavo Grullon

Rice University - Jesse H. Jones Graduate School of Business

Yamil Kaba

Rice University - Jesse H. Jones Graduate School of Business

Alexander Nuñez-Torres

CUNY Lehman College

Date Written: May 23, 2018

Abstract

We demonstrate that sorting stocks on sales seasonality predicts future abnormal returns. A long-short strategy of buying low-sales-season stocks and shorting high-sales-season stocks generates an annual alpha of 8.4%. Further, this strategy has become stronger over time, generating an annual alpha of approximately 15% over the last decade. This seasonal effect predicts future stock returns in cross-sectional regressions, and is independent of previously documented seasonal anomalies. Moreover, the alphas from this trading strategy cannot be explained by differences in stock market liquidity, systematic risk, asymmetric information, or financing decisions. Further tests indicate that this phenomenon may be driven partially by seasonal fluctuations in the level of investor attention.

Keywords: Sales Seasonality, Stock Returns, Investor Attention

JEL Classification: G12, G14

Suggested Citation

Grullon, Gustavo and Kaba, Yamil and Nuñez-Torres, Alexander, When Low Beats High: Riding the Sales Seasonality Premium (May 23, 2018). Available at SSRN: https://ssrn.com/abstract=3174181 or http://dx.doi.org/10.2139/ssrn.3174181

Gustavo Grullon (Contact Author)

Rice University - Jesse H. Jones Graduate School of Business ( email )

P.O. Box 2932
Houston, TX 77252-2932
United States
(713) 348-6138 (Phone)
(713) 348-6331 (Fax)

HOME PAGE: http://www.ruf.rice.edu/~grullon/

Yamil Kaba

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

Alexander Nuñez-Torres

CUNY Lehman College ( email )

Bronx, NY 10468
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
388
Abstract Views
1,476
rank
74,625
PlumX Metrics