An investigation into seasonality in the futures market

✍ Scribed by Gerald D. Gay; Tae-Hyuk Kim

• Publisher: John Wiley and Sons
• Year: 1987
• Tongue: English
• Weight: 786 KB
• Volume: 7
• Category: Article
• ISSN: 0270-7314
• DOI: 10.1002/fut.3990070207

✦ Synopsis

for and identifies day-of-the-week and month-of-the-year effects market. The results are surprisingly similar to those found in -_ studies of seasonality in stock returns, despite the existence of significant institutional differences between the two markets. Among the more notable findings are the disappearance of a large turn-of-the-year effect as well as all day-of-the-week patterns following the enactment of the Economic Recovery Act of 1981 which significantly affected futures taxation. This evidence regarding the turn-of-the-year effect strengthens arguments that turn-of-the-year effects in securities markets may indeed be attributed to year-end tax loss selling.

I. INTRODUCTION

Recent research has documented several types of stock market anomalies pertaining to such factors as firm attributes, information effects, or market seasonality. Firm attributes typically include size and EIP ratios, while information effects relate to such events as the announcement of earnings, dividends, capital structure changes, and stock splits. While the anomalous evidence related to these former two classes is often attributed to factors such as misspecification in the CAPM, the existence of persistent seasonality is an especially puzzling phenomenon from the viewpoint of market efficiency.

Testing of seasonality in stock returns has been a hotly researched topic. The

We have benefited from discussion with Raymond C. Chiang and the comments of two referees of this Journal.