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Gone fishin': Seasonality in trading activity and asset prices

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  • Hong, Harrison
  • Yu, Jialin

Abstract

We use seasonality in stock trading activity associated with summer vacation as a source of exogenous variation to study the relationship between trading volume and expected return. Using data from 51 stock markets, we first confirm a widely held belief that stock turnover is significantly lower during the summer because market participants are on vacation. Interestingly, we find that mean stock return is also lower during the summer for countries with significant declines in trading activity. This relationship is not due to time-varying volatility. Moreover, both large and small investors trade less and the price of trading (bid-ask spread) is higher during the summer. These findings suggest that heterogeneous agent models are essential for a complete understanding of asset prices.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Markets.

Volume (Year): 12 (2009)
Issue (Month): 4 (November)
Pages: 672-702

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Handle: RePEc:eee:finmar:v:12:y:2009:i:4:p:672-702

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Web page: http://www.elsevier.com/locate/finmar

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References

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Citations

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Cited by:
  1. Dumitriu, Ramona & Stefanescu, Razvan, 2013. "Efecte Gone Fishin’ la Bursa de Valori din Bucureşti
    [Gone Fishin’ Effects on the Bucharest Stock Exchange]
    ," MPRA Paper 52473, University Library of Munich, Germany, revised 28 Sep 2013.
  2. Kaustia, Markku & Rantapuska, Elias, 2013. "Does mood affect trading behavior?," SAFE Working Paper Series 4, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
  3. Levy, Tamir & Yagil, Joseph, 2012. "The week-of-the-year effect: Evidence from around the globe," Journal of Banking & Finance, Elsevier, vol. 36(7), pages 1963-1974.
  4. Stefanescu, Razvan & Dumitriu, Ramona & Nistor, Costel, 2012. "Prolonged holiday effects on Romanian capital market before and after the adhesion to EU," MPRA Paper 52770, University Library of Munich, Germany, revised Jan 2013.
  5. Baur, Dirk G., 2013. "The autumn effect of gold," Research in International Business and Finance, Elsevier, vol. 27(1), pages 1-11.
  6. Owen Lamont & Andrea Frazzini, 2007. "The Earnings Announcement Premium and Trading Volume," NBER Working Papers 13090, National Bureau of Economic Research, Inc.

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