Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Santa Claus Rally and Firm Size

Santa Claus Rally and Firm Size PurposeSeveral articles in the popular press have detailed an end-of-year anomaly known as the Santa Claus Rally, a period best defined as the last five trading days of December and the first two trading days of January. This study examines U.S. stock market returns over this period from 1926 through 2014. We find that returns are generally higher during the period and that the effect is considerably stronger for small firm portfolios relative to large capitalization portfolios. We also provide convincing evidence that the three most important trading days (especially for small stock portfolios) are the last trading day in December and the first two trading days in January. Our results are supported by parametric and non-parametric tests. Design/methodology/approachWe examine the Santa Claus Rally by relating it to firm size in the stock markets of the United States. The Santa Claus Rally consists of the last five trading days in December and the first two in January. We use t-tests, non-parametric test and regression analysis to determine if investors in small firms get superior returns over the period 1926-2014. FindingsWe find that returns are generally higher during the period and that the effect is considerably stronger for small firm portfolios relative to large capitalization portfolios. We also provide convincing evidence that the three most important trading days (especially for small stock portfolios) are the last trading day in December and the first two trading days in January. Research limitations/implicationsWe only check the markets in the USA. Market makers can use this to get significantly high returns during the Christmas-New Year period. Our study shows for the first time that there is a size effect as part of the Santa Claus Rally. Practical implications1. This is the first study to show that Santa Claus Rally exists for a long time in the USA. 2. It is the first study to show that there is a size effect in Santa Claus Rally 3. Market participants could get significantly higher returns by investing or being invested in the stock market during this period. Originality/valueThis is the first major academic study to examine Santa Claus Rally in this much detail. We not only show that the rally exists, we show that it is based on firm size and has been in existence for nearly ninety years in the US. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Finance Emerald Publishing

Santa Claus Rally and Firm Size

Download PDF
25 pages

Loading next page...
 
/lp/emerald-publishing/santa-claus-rally-and-firm-size-HgK09F1MIn
Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0307-4358
DOI
10.1108/MF-10-2015-0280
Publisher site
See Article on Publisher Site

Abstract

PurposeSeveral articles in the popular press have detailed an end-of-year anomaly known as the Santa Claus Rally, a period best defined as the last five trading days of December and the first two trading days of January. This study examines U.S. stock market returns over this period from 1926 through 2014. We find that returns are generally higher during the period and that the effect is considerably stronger for small firm portfolios relative to large capitalization portfolios. We also provide convincing evidence that the three most important trading days (especially for small stock portfolios) are the last trading day in December and the first two trading days in January. Our results are supported by parametric and non-parametric tests. Design/methodology/approachWe examine the Santa Claus Rally by relating it to firm size in the stock markets of the United States. The Santa Claus Rally consists of the last five trading days in December and the first two in January. We use t-tests, non-parametric test and regression analysis to determine if investors in small firms get superior returns over the period 1926-2014. FindingsWe find that returns are generally higher during the period and that the effect is considerably stronger for small firm portfolios relative to large capitalization portfolios. We also provide convincing evidence that the three most important trading days (especially for small stock portfolios) are the last trading day in December and the first two trading days in January. Research limitations/implicationsWe only check the markets in the USA. Market makers can use this to get significantly high returns during the Christmas-New Year period. Our study shows for the first time that there is a size effect as part of the Santa Claus Rally. Practical implications1. This is the first study to show that Santa Claus Rally exists for a long time in the USA. 2. It is the first study to show that there is a size effect in Santa Claus Rally 3. Market participants could get significantly higher returns by investing or being invested in the stock market during this period. Originality/valueThis is the first major academic study to examine Santa Claus Rally in this much detail. We not only show that the rally exists, we show that it is based on firm size and has been in existence for nearly ninety years in the US.

Journal

Managerial Finance – Emerald Publishing

Published: Aug 8, 2016

There are no references for this article.