Calendar Effects on Stock Returns Across Multiple States

Abstract

We test calendar effects on stock returns considering business and presidential cycles and volatility regimes and show evidence for eight financial market states. We jointly consider four types of seasonality: the day-of-the-week effect (DWE), the macroeconomic announcement effect (MAE), the January effect (JE) and the macroeconomic announcement-January effect (MAJE). Our approach enables us to determine in which states the efficient-market hypothesis (EMH) does not hold. Most of the evidence found is for the DWE, which arises mainly under low volatility regimes and in contraction periods in both Democratic and Republican administrations.