Seasonalities in Common Stock Returns: Evidence from Germany and Sweden
Abstract: This paper studies return seasonalities in the cross-section of German and Swedish listed common stocks. We find that stock returns in both countries exhibit traditional return patterns, such as short-term reversal, momentum, and signs of long-term reversal effects. We observe that current-calendar-month returns are positively correlated with historical same-calendar-month returns. This annual seasonality pattern is visible for up to ten years. However, it varies significantly when constructing different subsamples, based on geography, time periods, or firm characteristics. The annual pattern is stronger for Swedish stocks in general. Trading strategies which exploit the annual pattern earn significantly positive returns. Performance analyses shows that returns of such strategies are not explained by the three traditional Fama & French (1993) risk factors.
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