Finance professors behind a 90-year seasonality study
Josef Lakonishok & Seymour Smidt
Josef Lakonishok is Karnes Professor of Finance (now retired) at the University of Illinois at Urbana-Champaign and co-founded LSV Asset Management in 1994. Seymour Smidt (died 2017) taught economics and finance at Cornell from 1956 to 2005. Their 1988 Review of Financial Studies paper examined about 90 years of daily Dow Jones Industrial Average returns.
What they argue
- Ninety years of DJIA data show persistently unusual returns around the turn of the week, the turn of the month, the turn of the year and holidays.
- The turn-of-the-month effect is concentrated in a four-day window: the last trading day of a month and the first three trading days of the next.
Sources
Summaries are Be The Puck's paraphrase of public material. Be The Puck has no affiliation with the people listed.
Books and papers
- Are Seasonal Anomalies Real? A Ninety-Year Perspective, Review of Financial Studies 1(4): 403–425 (1988)
Turn-of-the-month effect
Rule and full recordCalendar · daily · with Robert A. Ariel
Returns bunch up around the start of each month. Hold for four trading days: the last day of a month and the first three of the next.
Best risk-adjusted results against buy and hold:
Pre-holiday effect (the trading day before NYSE holidays)
Rule and full recordCalendar · daily · with Robert A. Ariel
Own the stock only on the last trading day before each stock-market holiday, a day that has historically paid many times the average daily return.
Best risk-adjusted results against buy and hold:
Weekend (Monday) effect: skip the Friday-to-Monday return
Rule and full recordCalendar · daily · with Kenneth French
Step out at the week's last close and buy back at the next week's first close, skipping the weekend-plus-Monday stretch that used to lose money.
Best risk-adjusted results against buy and hold: