I’ve previously written about a bi-annual seasonality pattern in US equity markets: https://rrspstrategy.wordpress.com/2014/05/16/bi-annual-seasonality/
The quarterly average market (Mkt-RF) returns from 1950 to present are shown below (data from Ken French’s library). Quarters 1-4 are even years and 5-8 are odd years.
The table shows that mean returns of quarters 4-6 are greater than zero with high significance (t-stat > 2.3).
Except for Q8 which is marginal, all other quarterly means (including negative values) are not statistically different from zero (t-stat < 2). Therefore it is not possible to profit from this effect by excluding negative periods, hence the ‘partial’ debunking.
Caveats to these test results are that the dataset is small (32 points) and financial data is not normally distributed.
- Seasonality is a statistically significant effect:
- Quarters 4-6 have mean returns above zero.
- Other quarterly means are not statistically different from zero.
- A robust calendar strategy to avoid negative periods cannot be designed.