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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.

Suggested Citation

  • Hong, Harrison & Yu, Jialin, 2009. "Gone fishin': Seasonality in trading activity and asset prices," Journal of Financial Markets, Elsevier, vol. 12(4), pages 672-702, November.
  • Handle: RePEc:eee:finmar:v:12:y:2009:i:4:p:672-702
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Ramona DUMITRIU & Razvan STEFANESCU, 2014. "Gone Fishin’ Effects In Returns," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 254-261.
    2. Dan Li & Geng Li, 2011. "Belief dispersion among household investors and stock trading volume," Finance and Economics Discussion Series 2011-39, Board of Governors of the Federal Reserve System (U.S.).
    3. repec:ddj:fserec:y:2017:p:95-112 is not listed on IDEAS
    4. Steffen Meyer & Michaela Pagel, 2017. "Fresh Air Eases Work – The Effect of Air Quality on Individual Investor Activity," NBER Working Papers 24048, National Bureau of Economic Research, Inc.
    5. Söderberg, Jonas, 2008. "Liquidity on the Scandinavian Order-driven Stock Exchanges," CAFO Working Papers 2009:11, Linnaeus University, Centre for Labour Market Policy Research (CAFO), School of Business and Economics.
    6. Haibin Xie & Qilin Qin & Shouyang Wang, 2016. "Is Halloween Effect a New Puzzle? Evidence from Price Gap," Review of Economics & Finance, Better Advances Press, Canada, vol. 6, pages 19-31, November.
    7. Cohen, Gil, 2014. "Why don’t you trade only four days a year? An empirical study into the abnormal returns of quarters first trading day," Economics Letters, Elsevier, vol. 124(3), pages 335-337.
    8. Baur, Dirk G., 2013. "The autumn effect of gold," Research in International Business and Finance, Elsevier, vol. 27(1), pages 1-11.
    9. Alex Dontoh & Suresh Radhakrishnan & Joshua Ronen, 2007. "Is stock price a good measure for assessing value-relevance of earnings? An empirical test," Review of Managerial Science, Springer, vol. 1(1), pages 3-45, April.
    10. Müller, Christian, 2015. "Radical uncertainty: Sources, manifestations and implications," Economics Discussion Papers 2015-41, Kiel Institute for the World Economy (IfW).
    11. Kaustia, Markku & Rantapuska, Elias, 2016. "Does mood affect trading behavior?," Journal of Financial Markets, Elsevier, vol. 29(C), pages 1-26.
    12. Maria Socorro Gochoco-Bautista & Jianxin Wang & Minxian Yang, 2014. "Commodity Price, Carry Trade, and the Volatility and Liquidity of Asian Currencies," The World Economy, Wiley Blackwell, vol. 37(6), pages 811-833, June.
    13. Li, Dan & Li, Geng, 2014. "Are Household Investors Noise Traders: Evidence from Belief Dispersion and Stock Trading Volume," Finance and Economics Discussion Series 2014-35, Board of Governors of the Federal Reserve System (U.S.).
    14. 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.
    15. Hoffmann, Peter & Colliard, Jean-Edouard, 2017. "Financial transaction taxes, market composition, and liquidity," Working Paper Series 2030, European Central Bank.
    16. 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.
    17. Odegaard, Bernt Arne, 2016. "Oslo Stock Exchange and the Weather," UiS Working Papers in Economics and Finance 2016/12, University of Stavanger.
    18. Stefanescu, Razvan & Dumitriu, Ramona, 2016. "Particularitǎţi ale evoluţiei variabilelor financiare
      [Some particularities of the financial variables evolution]
      ," MPRA Paper 73481, University Library of Munich, Germany, revised 02 Sep 2016.
    19. repec:eee:ecofin:v:43:y:2018:i:c:p:169-205 is not listed on IDEAS
    20. Owen Lamont & Andrea Frazzini, 2007. "The Earnings Announcement Premium and Trading Volume," NBER Working Papers 13090, National Bureau of Economic Research, Inc.
    21. repec:eee:riibaf:v:41:y:2017:i:c:p:292-302 is not listed on IDEAS
    22. 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.
    23. repec:spr:busres:v:11:y:2018:i:1:d:10.1007_s40685-017-0060-0 is not listed on IDEAS
    24. Philippe Wingender & Sara LaLumia, 2015. "Income Effects in Labor Supply: Evidence from Child-Related Tax Benefits," Department of Economics Working Papers 2015-04, Department of Economics, Williams College.
    25. 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.

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