Buy in May and Sell on St. Leger Day? The Reversal Halloween Effect in QMJ

7 Pages Posted: 5 Dec 2019 Last revised: 4 Feb 2020

See all articles by Xuquan Li

Xuquan Li

Harvest Fund Management Co., Ltd.

Ruozhou Liu

Peking University - Guanghua School of Management; Harvest Fund Management Co., Ltd.

Zili Zhang

Harvest Fund Management Co., Ltd.

Xuejun Zhao

Harvest Fund Management Co., Ltd.

Date Written: November 19, 2019

Abstract

Quality-minus-junk (QMJ) is a long-short factor that captures the time varying premium of high quality assets. The long side (Quality) is stocks with high quality and the short side (Junk) is stocks with low quality. In this paper, we find that both Quality and Junk have a significant Halloween effect: the portfolios have a relatively better performance during winter as compared with summer. In terms of the magnitude of Halloween effect, Junk is greater than Quality. As a result, the long-short QMJ factor exhibits a pattern of reversal Halloween effect and this result is robust under different study samples. In addition, we also find that the Halloween effect of the stock market (MKT) can be largely explained by its negative exposure on QMJ. After controlling for QMJ, the magnitude of Halloween effect for MKT diminishes more than 60%.

Keywords: Halloween effect; Quality-minus-junk; Seasonality; Stock market

JEL Classification: G14; G15

Suggested Citation

Li, Xuquan and Liu, Ruozhou and Zhang, Zili and Zhao, Xuejun, Buy in May and Sell on St. Leger Day? The Reversal Halloween Effect in QMJ (November 19, 2019). Available at SSRN: https://ssrn.com/abstract=3489865 or http://dx.doi.org/10.2139/ssrn.3489865

Xuquan Li

Harvest Fund Management Co., Ltd. ( email )

Beijing
China

Ruozhou Liu (Contact Author)

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Harvest Fund Management Co., Ltd. ( email )

Beijing
China

Zili Zhang

Harvest Fund Management Co., Ltd.

Beijing
China

Xuejun Zhao

Harvest Fund Management Co., Ltd. ( email )

Beijing
China

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