IDEAS home Printed from https://ideas.repec.org/p/lar/wpaper/2020-02.html
   My bibliography  Save this paper

In December Days are Shorter but Loans are Cheaper

Author

Listed:
  • Jérémie BERTRAND

    (IESEG School of Management)

  • Laurent WEILL

    (LaRGE Research Center, Université de Strasbourg)

Abstract

This study analyzes the month-of-the-year effect on lending decisions. Using data from a large US peer-to-peer lender, we perform regressions of loan acceptance and loan spread on month dummy variables, including a large set of borrower and loan control variables. We find evidence of a month-of-the-year effect on loan acceptance and loan pricing. December is the best month to ask for a loan, with the highest chance of acceptance and the lowest spread. Loan applications have the lowest chance of acceptance in January while loan pricing is highest in August and September. We test the potential explanations of the calendar anomalies and find some support for trade loading, such that granted loans might be inflated at the end of the quarter to hit quarterly targets.

Suggested Citation

  • Jérémie BERTRAND & Laurent WEILL, 2020. "In December Days are Shorter but Loans are Cheaper," Working Papers of LaRGE Research Center 2020-02, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    • Handle: RePEc:lar:wpaper:2020-02
    as

    Download full text from publisher

    File URL: http://ifs.u-strasbg.fr/large/publications/2020/2020-02.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lopez-Gracia, Jose & Aybar-Arias, Cristina, 2000. "An Empirical Approach to the Financial Behaviour of Small and Medium Sized Companies," Small Business Economics, Springer, vol. 14(1), pages 55-63, February.
    2. David Hirshleifer & Tyler Shumway, 2003. "Good Day Sunshine: Stock Returns and the Weather," Journal of Finance, American Finance Association, vol. 58(3), pages 1009-1032, June.
    3. Malcolm Baker & Jeffrey Wurgler, 2006. "Investor Sentiment and the Cross‐Section of Stock Returns," Journal of Finance, American Finance Association, vol. 61(4), pages 1645-1680, August.
    4. Barberis, Nicholas & Thaler, Richard, 2003. "A survey of behavioral finance," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 18, pages 1053-1128, Elsevier.
    5. Campbell, John Y. & Yogo, Motohiro, 2006. "Efficient tests of stock return predictability," Journal of Financial Economics, Elsevier, vol. 81(1), pages 27-60, July.
    6. Mustafa Gultekin & Bulent Gultekin, "undated". "Stock Market Seasonality: Internal Evidence," Rodney L. White Center for Financial Research Working Papers 17-83, Wharton School Rodney L. White Center for Financial Research.
    7. Gambacorta, Leonardo, 2008. "How do banks set interest rates?," European Economic Review, Elsevier, vol. 52(5), pages 792-819, July.
    8. Jagtiani, Julapa & Lemieux, Catharine, 2018. "Do fintech lenders penetrate areas that are underserved by traditional banks?," Journal of Economics and Business, Elsevier, vol. 100(C), pages 43-54.
    9. Jeffrey Jaffe & R. Westerfield, "undated". "The Week-End Effect in Common Stock Returns: The International Evidence," Rodney L. White Center for Financial Research Working Papers 3-85, Wharton School Rodney L. White Center for Financial Research.
    10. G.M. Constantinides & M. Harris & R. M. Stulz (ed.), 2003. "Handbook of the Economics of Finance," Handbook of the Economics of Finance, Elsevier, edition 1, volume 1, number 1.
    11. Jaffe, Jeffrey F & Westerfield, Randolph, 1985. "The Week-End Effect in Common Stock Returns: The International Evidence," Journal of Finance, American Finance Association, vol. 40(2), pages 433-454, June.
    12. Murfin, Justin & Petersen, Mitchell, 2016. "Loans on sale: Credit market seasonality, borrower need, and lender rents," Journal of Financial Economics, Elsevier, vol. 121(2), pages 300-326.
    13. Gultekin, Mustafa N. & Gultekin, N. Bulent, 1983. "Stock market seasonality : International Evidence," Journal of Financial Economics, Elsevier, vol. 12(4), pages 469-481, December.
    14. Allen, Linda & Saunders, Anthony, 1992. "Bank window dressing: Theory and evidence," Journal of Banking & Finance, Elsevier, vol. 16(3), pages 585-623, June.
    15. Jeff Dominitz & Charles F. Manski, 2004. "How Should We Measure Consumer Confidence?," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 51-66, Spring.
    16. Julapa Jagtiani & Catharine Lemieux, 2019. "The roles of alternative data and machine learning in fintech lending: Evidence from the LendingClub consumer platform," Financial Management, Financial Management Association International, vol. 48(4), pages 1009-1029, December.
    17. Croux, Christophe & Jagtiani, Julapa & Korivi, Tarunsai & Vulanovic, Milos, 2020. "Important factors determining Fintech loan default: Evidence from a lendingclub consumer platform," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 270-296.
    18. Stambaugh, Robert F. & Yu, Jianfeng & Yuan, Yu, 2012. "The short of it: Investor sentiment and anomalies," Journal of Financial Economics, Elsevier, vol. 104(2), pages 288-302.
    19. Wright, William F. & Bower, Gordon H., 1992. "Mood effects on subjective probability assessment," Organizational Behavior and Human Decision Processes, Elsevier, vol. 52(2), pages 276-291, July.
    20. Jun Qian & Philip E. Strahan, 2007. "How Laws and Institutions Shape Financial Contracts: The Case of Bank Loans," Journal of Finance, American Finance Association, vol. 62(6), pages 2803-2834, December.
    21. G.M. Constantinides & M. Harris & R. M. Stulz (ed.), 2003. "Handbook of the Economics of Finance," Handbook of the Economics of Finance, Elsevier, edition 1, volume 1, number 2.
    22. Boris Vallée & Yao Zeng, 2019. "Marketplace Lending: A New Banking Paradigm?," The Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 1939-1982.
    23. Ariel, Robert A, 1990. "High Stock Returns before Holidays: Existence and Evidence on Possible Causes," Journal of Finance, American Finance Association, vol. 45(5), pages 1611-1626, December.
    24. Josef Lakonishok, Seymour Smidt, 1988. "Are Seasonal Anomalies Real? A Ninety-Year Perspective," The Review of Financial Studies, Society for Financial Studies, vol. 1(4), pages 403-425.
    25. Daniel, Kent & Hirshleifer, David & Teoh, Siew Hong, 2002. "Investor psychology in capital markets: evidence and policy implications," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 139-209, January.
    26. Akhtar, Shumi & Faff, Robert & Oliver, Barry & Subrahmanyam, Avanidhar, 2012. "Stock salience and the asymmetric market effect of consumer sentiment news," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3289-3301.
    27. Vladimir Kotomin & Drew Winters, 2006. "Quarter-End Effects in Banks: Preferred Habitat or Window Dressing?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 29(1), pages 61-82, February.
    28. Ariel, Robert A., 1987. "A monthly effect in stock returns," Journal of Financial Economics, Elsevier, vol. 18(1), pages 161-174, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Choudhary, Priya & Thenmozhi, M., 2024. "Fintech and financial sector: ADO analysis and future research agenda," International Review of Financial Analysis, Elsevier, vol. 93(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Paul-Olivier KLEIN & Rima TURK & Laurent WEILL, 2017. "How Religiosity Shapes Investor Behavior: Sukuk Issuances During Ramadan," Working Papers of LaRGE Research Center 2017-01, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    2. Adam Zaremba & Jacob Koby Shemer, 2018. "Price-Based Investment Strategies," Springer Books, Springer, number 978-3-319-91530-2, June.
    3. Diego Winkelried & Luis A. Iberico, 2018. "Calendar effects in Latin American stock markets," Empirical Economics, Springer, vol. 54(3), pages 1215-1235, May.
    4. Mostafa Saidur Rahim Khan & Naheed Rabbani, 2019. "Market Conditions and Calendar Anomalies in Japanese Stock Returns," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 26(2), pages 187-209, June.
    5. Matteo Rossi & Gabriella Marcarelli & Antonella Ferraro & Antonio Lucadamo, 2020. "How do Calendar Anomalies Affect an Investment Choice? A Proposal of an Analytic Hierarchy Process Model," International Journal of Economics and Financial Issues, Econjournals, vol. 10(1), pages 244-249.
    6. Yihao Zhang & Yu Jiang & Yongji Guo, 2017. "The effects of haze pollution on stock performances: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 49(23), pages 2226-2237, May.
    7. Klein, Paul-Olivier & Turk, Rima & Weill, Laurent, 2017. "Religiosity vs. well-being effects on investor behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 138(C), pages 50-62.
    8. Terence Mills & J. Andrew Coutts, 1995. "Calendar effects in the London Stock Exchange FT-SE indices," The European Journal of Finance, Taylor & Francis Journals, vol. 1(1), pages 79-93.
    9. Lepori, Gabriele M., 2015. "Investor mood and demand for stocks: Evidence from popular TV series finales," Journal of Economic Psychology, Elsevier, vol. 48(C), pages 33-47.
    10. Bing Zhang & Xindan Li, 2006. "Do Calendar Effects Still Exist in the Chinese Stock Markets?," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 4(2), pages 151-163.
    11. Khalil Jebran & Shihua Chen, 2017. "Examining anomalies in Islamic equity market of Pakistan," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 7(3), pages 275-289, July.
    12. Bogdan Batrinca & Christian W. Hesse & Philip C. Treleaven, 2020. "Expiration day effects on European trading volumes," Empirical Economics, Springer, vol. 58(4), pages 1603-1638, April.
    13. Tantisantiwong, Nongnuch & Halari, Anwar & Helliar, Christine & Power, David, 2018. "East meets West: When the Islamic and Gregorian calendars coincide," The British Accounting Review, Elsevier, vol. 50(4), pages 402-424.
    14. Bertrand, Jérémie & Burietz, Aurore & Weill, Laurent, 2021. "The month-of-the-year effect in corporate lending," Finance Research Letters, Elsevier, vol. 43(C).
    15. Lobão, Júlio, 2019. "Seasonal anomalies in the market for American depository receipts," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 24(48), pages 241-265.
    16. Stefanescu, Răzvan & Dumitriu, Ramona, 2016. "The impact of the Great Lent and of the Nativity Fast on the Bucharest Stock Exchange," MPRA Paper 89023, University Library of Munich, Germany, revised 22 Dec 2016.
    17. KUMAR Satish, 2017. "A Review On The Evolution Of Calendar Anomalies," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 12(1), pages 95-109, April.
    18. Itzhak Venezia, 2018. "Lecture Notes in Behavioral Finance," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 10751, September.
    19. Birru, Justin, 2018. "Day of the week and the cross-section of returns," Journal of Financial Economics, Elsevier, vol. 130(1), pages 182-214.
    20. Tariq Aziz & Valeed Ahmad Ansari, 2018. "The Turn of the Month Effect in Asia-Pacific Markets: New Evidence," Global Business Review, International Management Institute, vol. 19(1), pages 214-226, February.

    More about this item

    Keywords

    Fintech; calendar anomalies; loan.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lar:wpaper:2020-02. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christophe J. Godlewski (email available below). General contact details of provider: https://edirc.repec.org/data/lastrfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.