Seasonality in outliers of daily stock returns: A tail that wags the dog?
We document significant intra-year seasonality in outliers of S&P500 daily rates of return. Controlling for outliers in dummy regressions reveals that both the January and Monday effects turn from insignificant to highly significant. Mean daily return on January doubles and becomes significantly higher than all other months of the year, and Monday's mean return turns significantly positive and higher than other days of the week. The recently documented Halloween effect turns significant only after controlling for outliers as June, August, and September turn out to be months with remarkably low rates of returns. Being random, outliers cannot serve as instrumental variables for designing trading rules, yet, their impact on options pricing through the increase in volatility, may be applied for profitable options strategies.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Connolly, Robert A., 1989. "An Examination of the Robustness of the Weekend Effect," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(02), pages 133-169, June.
- Blume, Marshall E. & Stambaugh, Robert F., 1983. "Biases in computed returns : An application to the size effect," Journal of Financial Economics, Elsevier, vol. 12(3), pages 387-404, November.
- Keim, Donald B., 1983. "Size-related anomalies and stock return seasonality : Further empirical evidence," Journal of Financial Economics, Elsevier, vol. 12(1), pages 13-32, June.
- G. William Schwert, 2002.
"Anomalies and Market Efficiency,"
NBER Working Papers
9277, National Bureau of Economic Research, Inc.
- Gibbons, Michael R & Hess, Patrick, 1981. "Day of the Week Effects and Asset Returns," The Journal of Business, University of Chicago Press, vol. 54(4), pages 579-96, October.
- Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
- Bollerslev, Tim, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
Journal of Econometrics,
Elsevier, vol. 31(3), pages 307-327, April.
- Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Marshall Blume & Robert Stambaugh, . "Biases in Computed Returns: An Application to the Size Effect (Revision of 2-83)," Rodney L. White Center for Financial Research Working Papers 11-83, Wharton School Rodney L. White Center for Financial Research.
- Reinganum, Marc R., 1983. "The anomalous stock market behavior of small firms in January : Empirical tests for tax-loss selling effects," Journal of Financial Economics, Elsevier, vol. 12(1), pages 89-104, June.
- French, Kenneth R., 1980. "Stock returns and the weekend effect," Journal of Financial Economics, Elsevier, vol. 8(1), pages 55-69, March.
When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:17:y:2008:i:5:p:784-792. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.