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When low beats high: Riding the sales seasonality premium

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  • Grullon, Gustavo
  • Kaba, Yamil
  • Núñez-Torres, Alexander

Abstract

This paper examines whether predictable seasonal patterns in firm fundamentals generate time variation in stock returns. Our findings indicate that stock returns are counterseasonal. Specifically, a long-short strategy of buying low-sales season stocks and shorting high-sales season stocks produces an annual alpha of 8.4% (14.5% over the last decade). This seasonal effect has a relatively high Sharpe ratio and occurs independently of previously documented seasonal anomalies. We analyze several possible hypotheses for this phenomenon.

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  • Grullon, Gustavo & Kaba, Yamil & Núñez-Torres, Alexander, 2020. "When low beats high: Riding the sales seasonality premium," Journal of Financial Economics, Elsevier, vol. 138(2), pages 572-591.
    • Handle: RePEc:eee:jfinec:v:138:y:2020:i:2:p:572-591
    DOI: 10.1016/j.jfineco.2020.06.003
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    Cited by:

    1. Huang, Jiexiang & Tan, Yongxian & Zhao, Hailong, 2020. "Does the sales seasonality anomaly exist in China?," Pacific-Basin Finance Journal, Elsevier, vol. 63(C).
    2. Tze Chuan (Chewie) Ang & Tarun Chordia & Vivian Van-Anh Mai & Harminder Singh, 2022. "The Marketing Capability Premium [Formulation and estimation of stochastic frontier production function models]," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 12(4), pages 918-959.
    3. Marks, Joseph M. & Shang, Chenguang, 2024. "Business seasonality and stock liquidity," Journal of Financial Markets, Elsevier, vol. 67(C).

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    More about this item

    Keywords

    Asset pricing; Return predictability; Seasonality; Market efficiency; Product markets;
    All these keywords.

    JEL classification:

    • 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

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