Are investors no longer SAD? The Seasonal Affective Disorder anomaly revisited

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School of Business | Bachelor's thesis
Electronic archive copy is available locally at the Harald Herlin Learning Centre. The staff of Aalto University has access to the electronic bachelor's theses by logging into Aaltodoc with their personal Aalto user ID. Read more about the availability of the bachelor's theses.

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Date

2020

Department

Rahoituksen laitos

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Mcode

Degree programme

Rahoitus

Language

en

Pages

30+23

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Abstract

An influential paper by Kamstra et al. (2003) showed that seasonal affective disorder (SAD) can be used to explain seasonal patterns in stock returns. This thesis extends the original study by testing whether the anomaly still exists in the 21st century. The hypothesis is tested with OLS regressions for 12 indices from 8 different countries around the world. The full sample was divided into a recent and historical subsample to enable both replicating earlier findings and examining the effect distinctively in the 21st century. The results showed that while a significant SAD effect can be found in the historical sample, the anomaly appears to have disappeared from the stock market. These results imply that arbitrageurs may have corrected the mispricing associated with SAD or perhaps the anomaly was merely a statistical coincidence. Nevertheless, the findings of this study yield important implications for future research on SAD in the stock market.

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Thesis advisor

Luotonen, Niilo

Keywords

SAD, seasonal affective disorder, anomaly, seasonality, mood, sentiment, risk aversion, stock returns

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https://urn.fi/URN:NBN:fi:aalto-202101241337

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[kand] Kauppakorkeakoulu / BIZ