The Calendar Structure of the Japanese Stock Market: The ‘Sell in May Effect’ versus the‘
School of Commerce, Kwansei Gakuin University, Nishinomiya, Japan
Graduate School of Business Administration, Kobe University, Kobe, Japan and
Institute of Business and Accounting, Kwansei Gakuin University,Nishinomiya, Japan
We report on a seasonal pattern that has persisted in the Japanese stockmarket for more than half a century: Mean stock returns are signiﬁcantlypositive for months during the ﬁrst half of the calendar year and signiﬁcantlynegative for months during the second half. Dubbed the
, this seasonality is independent of other known calendar anomalies,such as the so-called January effect. The
effect should bedistinguished from the ‘sell in May effect,’ because Japanese stocks performwell in June and poorly in November and December. The
effect varies in magnitude among ﬁrms and is particularly signiﬁcant amongsmall ﬁrms with high book-to-market ratios. Nonetheless, the effect exists,regardless of a company’s size or book-to-market ratio.
Japanese monthly stock returns are signiﬁcantly higher during the January to June versus the July to December periods. We call this seasonality the
effect, after a traditional Japanese ballad,
which advocates that peoplework only the ﬁrst half of the year and spend the second half in leisure. Out of our 59-year time span study of the popular index of Nikkei 225, the index
The authors thank the following people for their helpful comments: Kenya Fujiwara, NobuyukiIsagawa, Yasuo Kakuta, Hideaki Kato, Hideo Kozumi, Yusaku Sakaguchi, Kengo Shiroshita, HitoshiTakehara, Roger Van Noorden, Katsunari Yamaguchi, and an editor-in-chief, anonymous associateeditor, referee, and seminar participants at the Asian Finance Association International Conferencein Hong Kong, along with colleagues at Kwansei Gakuin University and Kobe University. TheGrants-in-Aid for Scientiﬁc Research by Japan Society for the Promotion of Science provided ﬁnan-cial support. Any errors are our own.
is a well-known folk song traditionally sung by people since the Edo era(1603–1868) in the Sasayama district, in western Japan.
International Review of Finance,
13:2, 2013: pp. 161–185DOI: 10.1111/irﬁ.12003
© 2013 International Review of Finance Ltd. 2013