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A Valuation Study of Stock-Market Seasonality and Firm Size

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  • Zhiwu Chen
  • Jan Jindra

Abstract

Existing studies on market seasonality and the size effect are largely based on realized returns. This paper investigates seasonal variations and size-related differences in cross-stock valuation distribution. We use three stock valuation measures, two derived from structural models and one from book/market ratio. With each measure, we find that the average level is the highest in midsummer and the lowest in mid-December. Furthermore, the valuation dispersion (or, kurtosis)across stocks increases towards the year end and reverses direction after the turn of the year, suggesting increased movements in both the under-and-overvaluation directions. Among size groups, small-cap stocks exhibit the sharpest decline in valuation from June to December and the highest rise from December to January. For most months, small-cap stocks have the lowest valuation among all size groups. In a typical mo

Suggested Citation

  • Zhiwu Chen & Jan Jindra, 2001. "A Valuation Study of Stock-Market Seasonality and Firm Size," Yale School of Management Working Papers ysm199, Yale School of Management.
    • Handle: RePEc:ysm:somwrk:ysm199
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    File URL: http://icfpub.som.yale.edu/publications/2482
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    Cited by:

    1. Bakshi, Gurdip & Chen, Zhiwu, 2005. "Stock valuation in dynamic economies," Journal of Financial Markets, Elsevier, vol. 8(2), pages 111-151, May.
    2. Ming Dong & David Hirshleifer, 2005. "A Generalized Earnings‐Based Stock Valuation Model," Manchester School, University of Manchester, vol. 73(s1), pages 1-31, September.
    3. James S. Ang & Yingmei Cheng, 2006. "Direct Evidence On The Market‐Driven Acquisition Theory," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 29(2), pages 199-216, June.

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