University of Liège (Belgium), INSEAD, Fontainebleau (France), and University of Liège (Belgium), respectively. The authors of the paper would like to thank an anonymous referee for his useful comments. An earlier version of this paper was presented at the Annual Meeting of the French Finance Association in December 1985.
Seasonality in the Risk-Return Relationship: Some International Evidence
Article first published online: 30 APR 2012
1987 The American Finance Association
The Journal of Finance
Volume 42, Issue 1, pages 49–68, March 1987
How to Cite
CORHAY, A., HAWAWINI, G. and MICHEL, P. (1987), Seasonality in the Risk-Return Relationship: Some International Evidence. The Journal of Finance, 42: 49–68. doi: 10.1111/j.1540-6261.1987.tb02549.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
We report evidence of seasonality in the Fama and MacBeth estimate of the CAPM-based risk premium in four stock exchanges: the NYSE and the London, Paris, and Brussels exchanges. Specifically, we found that, in Belgium and France, risk premia are positive in January and negative the rest of the year. There is no January seasonal in the U.K. risk premium. Instead, we observed in this country a positive April seasonal and a negative average risk premium over the rest of the year. In the U.S., the pattern of risk-premium seasonality coincides with the pattern of stock-return seasonality. Both are positive and significant only in January. We also found that the January risk premium in the U.S. is significantly larger than those observed in the European markets. Interestingly, the reported patterns of risk-premium seasonality in European equity markets do not fully coincide with the observed patterns of stock-return seasonality in these markets. For example, in the U.K., average stock returns are significant and positive in January and April, whereas the market risk premium is significantly positive only in April. A possible interpretation of this phenomenon is presented in the paper.