Abstract
We are the first to comprehensively investigate cross-sectional seasonalities and seasonal reversals in the Chinese A-share market. Empirically, utilizing monthly data from January 1995 to December 2019, we provide new supporting evidence that there are seasonalities and seasonal reversals in the cross-section. Interestingly, the occurrence of seasonal reversals takes a longer time than that of the U.S. market. Next, we explore explanations for cross-sectional seasonalities. The tests based upon macroeconomic risk, mood beta, and limits of arbitrage suggest that seasonalities are likely driven by temporary mispricing. Finally, we construct seasonality and seasonal reversal factors to study the investment value of seasonalities. We find that these factors can significantly increase the monthly Sharpe ratio by up to 0.34 and capture incremental information in predicting future returns relative to other well-known factors.
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