An Empirical Investigation Of The Persistence Of Stock And Bond Return Seasonality

Abstract

The purpose of this paper is to investigate the persistence of seasonality in stock and bond returns using data from 1926 to 1992. This study finds evidence of seasonality in stock returns during the 1926-92 period.  Dividing the data into sub-periods yields the following results: there was no evidence of stock market seasonality from 1926 to 1940, seasonality increased between 1941 and 1975 and then diminished slightly from 1976 to 1992. Specifically, the average January return was found to be significantly different than the average return in the other eleven months of the year.  Seasonality was found in the high-quality end of the corporate bond market during the 1966-78 period, but there was no evidence of seasonality in the government bond market.