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Seasonalities in the German stock market

Daniel Hofmann () and Karl Ludwig Keiber ()
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Daniel Hofmann: European University Viadrina
Karl Ludwig Keiber: European University Viadrina

Financial Markets and Portfolio Management, 2021, vol. 35, issue 2, No 1, 192 pages

Abstract: Abstract This paper suggests innovative investment strategies drawing on return seasonalities. By means of an out-of-sample study of the German stock market, we report that these long–short investment strategies earn on average raw returns up to 233 basis points per month throughout two decades from 1998 to 2017. On a monthly basis, this documents an outperformance of the corresponding Heston and Sadka (J Financ Econ 87(2):418–445, 2008) strategy by 66%. This outperformance is robust in magnitude even after adjusting for common risk factors along both the three-factor Fama and French (J Financ Econ 33(1):3–56, 1993) model and the four-factor Carhart (J Finance 52(1):57–82, 1997) model. Categorizing stocks into three risk profiles lets us conclude that long–short momentum portfolios of stocks with a low-risk profile generate robust investment performance.

Keywords: Seasonalities; Momentum investment; Performance attribution; Autocorrelation; Forecasting returns (search for similar items in EconPapers)
JEL-codes: G11 G17 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s11408-020-00373-1

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