The predictive power of sales seasonality over stock returns in the Asian stock markets

Abstract

This paper examines the predictive power of sales seasonality over stock returns in the Asian stock markets from January 2004 to December 2019. I find that sales seasonality has predictive power over future stock returns because of time variation. A long-short portfolio, which buys the firms in their low-sales seasons and shorts the firms in their high-sales seasons produces an annual alpha of 4.08% - 6.49% with an equally-weighted portfolio and an annual alpha of 8.04% - 10.76% with a value-weighted portfolio. The results remain significant after controlling for other previously documented return predicting variables.