A Stunning New Finding: Return Seasonalities are Everywhere

A Stunning New Finding: Return Seasonalities are Everywhere

May 18, 2016 Research Insights
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(Last Updated On: May 18, 2016)

We’ve discussed return seasonalities in the past, especially as they pertain to our approach to momentum. Turns out seasonality effects aren’t confined to momentum — they are literally everywhere and they are incredibly strong.

This paper will blow your mind once you let the results settle in a bit.

Turns out stock returns are lumpy across the calendar. Stocks don’t earn “average” returns each month, they earn a lot of return in some months and little to no returns in other months…and this pattern is predictable, persistent, and powerful.

Here is an image from the authors the explains the basic idea:

juhani part 1


A strategy that selects stocks based on their historical same-calendar-month returns earns an average return of 13% per year. We document similar return seasonalities in anomalies, commodities, international stock market indices, and at the daily frequency. The seasonalities overwhelm unconditional differences in expected returns…

Instead of focusing on particular characteristics to form portfolios (cheap, high mom, low vol, quality, etc.) one can simply form portfolios based on their performance during a particular month.

Here are their bottomline results:

juhani part 2
The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged, do not reflect management or trading fees, and one cannot invest directly in an index. Additional information regarding the construction of these results is available upon request.

Interesting, to say the least…more to come on this subject. The R&D engines will be roaring this summer.



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Definitions of common statistics used in our analysis are available here (towards the bottom)

About the Author

Wesley R. Gray, Ph.D.

After serving as a Captain in the United States Marine Corps, Dr. Gray earned a PhD, and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management that delivers affordable active exposures for tax-sensitive investors. Dr. Gray has published four books and a number of academic articles. Wes is a regular contributor to multiple industry outlets, to include the following: Wall Street Journal, Forbes, ETF.com, and the CFA Institute. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.

  • anonymous322

    Interesting idea, interesting paper. I’m having trouble replicating the results, though.

  • please share findings on replication issues.