Are return seasonalities due to risk or mispricing?

Matti Keloharju, Juhani T. Linnainmaa*, Peter Nyberg

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review


Stocks tend to earn high or low returns relative to other stocks every year in the same month (Heston and Sadka, 2008). We show these seasonalities are balanced out by seasonal reversals: a stock that has a high expected return relative to other stocks in one month has a low expected return relative to other stocks in the other months. The seasonalities and seasonal reversals add up to zero over the calendar year, which is consistent with seasonalities being driven by temporary mispricing. Seasonal reversals are economically large and statistically highly significant, and they resemble, but are distinct from, long-term reversals.

Original languageEnglish
Pages (from-to)138-161
Number of pages24
JournalJournal of Financial Economics
Issue number1
Early online date15 Jul 2020
Publication statusPublished - Jan 2021
MoE publication typeA1 Journal article-refereed


  • Cross-sectional seasonalities
  • Mispricing
  • Reversals
  • Risk

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