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Mood beta and seasonalities in stock returns

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  • Hirshleifer, David
  • Jiang, Danling
  • DiGiovanni, Yuting Meng

Abstract

Existing research has found cross-sectional seasonality of stock returns—the periodic outperformance of certain stocks during the same calendar months or weekdays. We hypothesize that assets’ different sensitivities to investor mood explain these effects and imply other seasonalities. Consistent with our hypotheses, relative performance across individual stocks or portfolios during past high or low mood months and weekdays tends to recur in periods with congruent mood and reverse in periods with noncongruent mood. Furthermore, assets with higher sensitivities to aggregate mood—higher mood betas—subsequently earn higher returns during ascending mood periods and earn lower returns during descending mood periods.

Suggested Citation

  • Hirshleifer, David & Jiang, Danling & DiGiovanni, Yuting Meng, 2020. "Mood beta and seasonalities in stock returns," Journal of Financial Economics, Elsevier, vol. 137(1), pages 272-295.
    • Handle: RePEc:eee:jfinec:v:137:y:2020:i:1:p:272-295
    DOI: 10.1016/j.jfineco.2020.02.003
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    More about this item

    Keywords

    Return seasonality; Investor mood; Mood beta; Market efficiency; Anomalies;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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