Seasonality in stock returns and government bond returns

We examine seasonality in stock and government bond returns arising from seasonal variation in daylight, investor mood, and investor risk aversion, known as the seasonal affective disorder (SAD) effect. We consider US Treasury returns and equity returns for the US, Canada, the UK, Germany, and Australia. New contributions include the following. For the first time, we consider the SAD effect across size-sorted stock return deciles, and we consider individual firm-level return data for the US and internationally. Additionally, we develop a new proxy to capture seasonality in investor risk aversion arising from seasonality in daylight, based on Google searches for “seasonal affective disorder” within each country. Using the new country-specific Google search proxy, we find evidence of a SAD effect in US government bond returns and international stock returns is at least as strong as it is when using a proxy based clinical timing of symptoms among SAD patients. In particular, international evidence for the SAD effect strengthens considerably using this new proxy. We also find the magnitude of the Monday and tax-loss effects in stock returns appear to be weakening over time, globally.