Abstract
Our simple new test for the Sell in May effect shows it not only defies stock market efficiency but also challenges the existence of a positive risk return trade off. When we examine the effect using all historical data for all stock market indices worldwide, we only find evidence of a significant positive ‘risk return’-trade-off during summer (May-October) in Mauritius. Pooling all country data we find excess returns during summer are significantly negative (-1.2% based on 33,348 monthly returns). Over the full year we find a positive estimate for the equity premium of 3.7% annually (t-value 7.65).
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