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Momentum and the Halloween Indicator: Evidence of a new seasonal pattern in momentum returns

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  • Bhootra, Ajay

Abstract

We report that momentum loser and winner portfolios earn much higher returns over November to April (winter) compared with May to October (summer). Specifically, the average monthly loser (winner) portfolio return is −0.46% (0.77%) over summer, and 1.72% (2.50%) over winter. This seasonal pattern is consistent with the relatively superior performance of the broader equity market over winter months (the “Halloween Indicator”). A modified momentum strategy designed to exploit this seasonal pattern has a much higher average return and Sharpe ratio than the conventional momentum strategy.

Suggested Citation

  • Bhootra, Ajay, 2019. "Momentum and the Halloween Indicator: Evidence of a new seasonal pattern in momentum returns," Finance Research Letters, Elsevier, vol. 31(C), pages 26-31.
    • Handle: RePEc:eee:finlet:v:31:y:2019:i:c:p:26-31
    DOI: 10.1016/j.frl.2019.04.013
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    References listed on IDEAS

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    Cited by:

    1. Song, Jian & Balvers, Ronald J., 2022. "Seasonality and momentum across national equity markets," The North American Journal of Economics and Finance, Elsevier, vol. 61(C).
    2. Ali, Fahad & Ülkü, Numan, 2021. "Quest for a parsimonious factor model in the wake of quality-minus-junk, misvaluation and Fama-French-six factors," Finance Research Letters, Elsevier, vol. 41(C).
    3. Wang, Jun & Song, Xiuna, 2022. "The effect of limited attention and risk attitude on left-tail reversal: Empirical results from a-share data in China," Finance Research Letters, Elsevier, vol. 46(PA).

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