Seasonal effects on stock markets

Abstract

We revisit factors associated with seasonality of stock markets. We find that interest rates and their seasonal components exhibit a strong relationship with returns and that association is more pronounced in countries, where interest rate seasonality is generally small. Additionally, using difference-in-difference estimation, we add to the growing evidence of increased synchronicity among countries belonging to the European Monetary Union. While we find strong evidence for stock market relationship with economic factors, our sample exhibits little indication that changing risk preferences throughout the year affect seasonality in stock returns.