One Country, Two Calendars: Lunar January Effect in China’s A-share Stock Market

Forthcoming at Asia-Pacific Journal of Financial Studies

59 Pages Posted: 19 Sep 2022

See all articles by Xiaobo Liang

Xiaobo Liang

University of Hawaii at Manoa, Shidler College of Business, Students

Qianqiu Liu

University of Hawaii at Manoa - Shidler College of Business

Allan A. Zebedee

Clarkson University

Date Written: September 3, 2022

Abstract

In this paper, we examine the January effect in China’s A-share stock market from January 1995 to December 2019 using both the solar and lunar calendars. We find consistent with the existing literature the absence of a traditional January effect in the solar calendar; however, we observe a strong January effect in the lunar calendar. The effect is much stronger in small firms. We demonstrate that the tax-loss selling and window dressing hypotheses cannot explain the turn-of-the-year effect in China. Instead, the turn-of-the-year effect in trading volume and buy orders help to explain the strong lunar January effect. As a falsification test, we examine the B-share market that is predominantly composed of foreign investors and find no evidence of the lunar January effect. Our results show that Chinese financial markets are more closely aligned with the traditional lunar calendar than the standard solar calendar.

Keywords: January effect, Chinese lunar calendar, China’s A-share market, Turn-of-the-year effect

JEL Classification: G11, G14, G15, G40

Suggested Citation

Liang, Xiaobo and Liu, Qianqiu and Zebedee, Allan A., One Country, Two Calendars: Lunar January Effect in China’s A-share Stock Market (September 3, 2022). Forthcoming at Asia-Pacific Journal of Financial Studies, Available at SSRN: https://ssrn.com/abstract=4209010

Xiaobo Liang

University of Hawaii at Manoa, Shidler College of Business, Students ( email )

2404 Maile Way
Honolulu, HI 96822
United States

Qianqiu Liu (Contact Author)

University of Hawaii at Manoa - Shidler College of Business ( email )

2404 Maile Way, E602f
Honolulu, HI 96822
United States
808-956-8736 (Phone)
808-956-9887 (Fax)

Allan A. Zebedee

Clarkson University ( email )

Potsdam, NY 13699-5780
United States
315.268.3890 (Phone)

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