Seasonality in Holding Period Returns

The focus of the extant stock market seasonality literature has been on the natural calendar intervals, such as day of the week or month of the year, and a month is the longest holding period that has been looked at. Using monthly indexes for ten local markets and the world market, this paper uncovers seasonalities of a different form. Specifically, it finds that seasonalities also exist for holding periods longer than a month. Indeed, seasonalities are detected for holding periods ranging from one month to eleven months. For example, for a six-month holding period, December or November are the best times to start the investment, while May or June are the worst times. The average difference (across the ten local markets) in annualized returns between the two investment periods is 23.8%! Moreover, the following intra-year pattern is found: January and December have the biggest one month growth; most of the growth within a year occurs between January and August; and the markets either are sluggish or decline between August and November.