Gone Fishin': Seasonality in Trading Activity and Asset Prices

38 Pages Posted: 13 Mar 2005 Last revised: 6 Sep 2011

See all articles by Harrison G. Hong

Harrison G. Hong

Columbia University, Graduate School of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER)

Jialin Yu

Hong Kong University of Science & Technology (HKUST) - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: October 2007

Abstract

We use seasonality in stock trading activity associated with summer vacation as a source of exogenous variation to study the relationship between trading volume and expected return. Using data from 51 stock markets, we first confirm a widely held belief that stock turnover is significantly lower during the summer because market participants are on vacation. Interestingly, we find that mean stock return is also lower during the summer for countries with significant declines in trading activity. This relationship is not due to time-varying volatility. Moreover, both large and small investors trade less and the price of trading (bid-ask spread) is higher during the summer. These findings suggest that heterogeneous agent models are essential for a complete understanding of asset prices.

Keywords: Seasonality, Turnover, Asset Prices

JEL Classification: G01

Suggested Citation

Hong, Harrison G. and Yu, Jialin, Gone Fishin': Seasonality in Trading Activity and Asset Prices (October 2007). Available at SSRN: https://ssrn.com/abstract=676743 or http://dx.doi.org/10.2139/ssrn.676743

Harrison G. Hong

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jialin Yu (Contact Author)

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

Clear Water Bay, Kowloon
Hong Kong

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