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Solar Term Anomaly in China Stock Market: Evidence from Shanghai Index

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  • Zhou Tianbao
  • Li Xinghao
  • Zhao Junguang

Abstract

This paper investigates the solar term effect in China stock market as a supplementary to the existing literature of calender effect. Based on a regression framework, this paper verifies the existence of solar term effect in Shanghai Index in multiple dimensions: inter-solar-term analysis, full sample analysis at mean level and risk level as well as the turn of solar term effect. Several solar terms have been found to cause significant positive and negative value to the return such as solar term 1,3 and 4. and bring high volatility such as solar term 8, 11 and 14. The result is reliable and robust under the Extreme Bound Analysis and various assumptions of errors distribution in IGARCH model. These findings give readers a new perspective to view calender effect under the influence of traditional Chinese culture that solar terms affect the market through affecting investors mood, expectation, enthusiasm, etc. which is a good evidence to the Culture bonus hypothesis proposed by Chen and Chien and the possible influence by the Chinese culture in other Asian markets.

Suggested Citation

  • Zhou Tianbao & Li Xinghao & Zhao Junguang, 2022. "Solar Term Anomaly in China Stock Market: Evidence from Shanghai Index," Papers 2203.12603, arXiv.org, revised Feb 2023.
    • Handle: RePEc:arx:papers:2203.12603
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    References listed on IDEAS

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    1. Burton G. Malkiel, 2003. "The Efficient Market Hypothesis and Its Critics," Working Papers 111, Princeton University, Department of Economics, Center for Economic Policy Studies..
    2. Chang, Tsangyao & Nieh, Chien-Chung & Yang, Ming Jing & Yang, Tse-Yu, 2006. "Are stock market returns related to the weather effects? Empirical evidence from Taiwan," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 364(C), pages 343-354.
    3. repec:pri:cepsud:91malkiel is not listed on IDEAS
    4. Kim, Jae H., 2017. "Stock returns and investors' mood: Good day sunshine or spurious correlation?," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 94-103.
    5. Mark J. Kamstra & Lisa A. Kramer & Maurice D. Levi, 2003. "Winter Blues: A SAD Stock Market Cycle," American Economic Review, American Economic Association, vol. 93(1), pages 324-343, March.
    6. Burton G. Malkiel, 2003. "The Efficient Market Hypothesis and Its Critics," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 59-82, Winter.
    7. Burton G. Malkiel, 2003. "The Efficient Market Hypothesis and Its Critics," Working Papers 111, Princeton University, Department of Economics, Center for Economic Policy Studies..
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