Abstract: The fall in stock-market trading during summer has real effects on stock-market efficiency. I examine the market efficiency of momentum, post-announcement earnings drift, and idiosyncratic volatility (IVOL). The profitability of a momentum winner-loser strategy is significantly enhanced in summer, thus accentuating momentum-related inefficiency. For positive unexpected earnings in summer, market inefficiency is attenuated, but for negative unexpected earnings market inefficiency is accentuated. The IVOL inefficiency is an exclusively summer effect. Once this effect is controlled for, a positive relation emerges between IVOL quintiles and alphas. Overall, market inefficiency appears to be accentuated in summer due to the fall in trading.
Publication Year: 2021
Publication Date: 2021-01-01
Language: en
Type: article
Indexed In: ['crossref']
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