Journal
PACIFIC-BASIN FINANCE JOURNAL
Volume 82, Issue -, Pages -Publisher
ELSEVIER
DOI: 10.1016/j.pacfin.2023.102171
Keywords
Equity return seasonality; Investor mood; Mood beta; Behavioral finance; Market efficiency; International finance
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This paper examines the existence of mood seasonality in an international setting, confirming the results of a previous study in the US equity market. The findings show that this seasonality is not specific to a particular sample and is present in non-US markets as well. The study also suggests that mood beta, the sensitivity of equity returns to aggregate investor mood, plays a role in explaining these mood seasonality effects.
This paper examines the existence of mood seasonality, documented by Hirshleifer et al. (2020, JFE) for the cross-section of US equity returns, in an international setting. First, we confirm the results of the original study. Next, we extend these findings to non-US markets and show that they are not sample-specific. A stock's relative historical seasonal returns are positively correlated with its relative future seasonal returns during similar or congruent mood periods and negatively related with its relative future seasonal returns during dissimilar or non-congruent mood periods. Moreover, both regression and portfolio analyses indicate that mood beta, the sensitivity of equity returns to aggregate investor mood, helps explain these mood seasonality effects.
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