Seasonality in the Cross Section of Factor Premia

Abstract

This study examines the seasonality effect in the cross section of factor premia representing a broad set of stock market strategies. Using cross-sectional and time-series tests, we investigated the cross-sectional seasonality of market, value, size, momentum, quality, and low-risk premia within a sample of 24 international equity markets for the years 1986–2016. We provide convincing evidence that the factors with the highest (lowest) mean returns in the same calendar months in the past continue to overperform (underperform) in seven of the studied countries: Denmark, Finland, France, Israel, Spain, Sweden, and the United States. Furthermore, when the factors in multiple countries are considered, the past same-month returns display strong predictive power for future size and low-risk premia.

Keywords: seasonal anomalies, calendar anomalies, factor premium, asset pricing, value, momentum, size, quality, low-volatility, international equity markets, market efficiency, return predictability

JEL Classification: G11, G12, G14, G15