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The “sell in May” effect: an empirical investigation of globally listed private equity markets

The “sell in May” effect: an empirical investigation of globally listed private equity markets The purpose of this paper is to test the so-called “Sell in May” effect in globally listed private equity markets based on monthly data covering the period 2004–2017.Design/methodology/approachOrdinary least squares regressions, generalized autoregressive conditional heteroscedasticity regressions and robust regressions are used to investigate the existence of the “Sell in May” effect in globally listed private equity markets. Additionally, the authors conduct robustness checks by dividing the sample period into two subperiods: pre-financial and post-financial crisis periods.FindingsThe authors find limited statistically significant evidence for the “Sell in May” effect. In particular, the authors observed a statistically significant “Sell in May” effect when taking time-varying volatility into account. These findings indicate that the “Sell in May” effect is driven by time-varying volatility. By contrast, economic significance as measured by visual return inspection and the magnitude of the estimated “Sell in May” coefficients in combination with their positive signs was found to be considerable.Practical implicationsThe findings are important for all kinds of investors and asset managers who are considering investing in listed private equity.Originality/valueThe authors present a novel study that examines the “Sell in May” effect for globally listed private equity markets by using LPX indices, offering valuable insight into this growing asset class. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Finance Emerald Publishing

The “sell in May” effect: an empirical investigation of globally listed private equity markets

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References (34)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0307-4358
DOI
10.1108/mf-07-2018-0322
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to test the so-called “Sell in May” effect in globally listed private equity markets based on monthly data covering the period 2004–2017.Design/methodology/approachOrdinary least squares regressions, generalized autoregressive conditional heteroscedasticity regressions and robust regressions are used to investigate the existence of the “Sell in May” effect in globally listed private equity markets. Additionally, the authors conduct robustness checks by dividing the sample period into two subperiods: pre-financial and post-financial crisis periods.FindingsThe authors find limited statistically significant evidence for the “Sell in May” effect. In particular, the authors observed a statistically significant “Sell in May” effect when taking time-varying volatility into account. These findings indicate that the “Sell in May” effect is driven by time-varying volatility. By contrast, economic significance as measured by visual return inspection and the magnitude of the estimated “Sell in May” coefficients in combination with their positive signs was found to be considerable.Practical implicationsThe findings are important for all kinds of investors and asset managers who are considering investing in listed private equity.Originality/valueThe authors present a novel study that examines the “Sell in May” effect for globally listed private equity markets by using LPX indices, offering valuable insight into this growing asset class.

Journal

Managerial FinanceEmerald Publishing

Published: May 23, 2019

Keywords: “Sell in May” effect; Calendar anomaly; Dummy regression; Listed private equity; G10; G11; G14; G15

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