The Month-of-the-Year Effect in the Australian Stock Market: An Analysis of the Market, Industry and Firm Size Impacts

Abstract

This letter examines the month-of-the-year effect in Australian daily stock returns at the market and industry levels and for small capitalisation stocks from Monday 9 September 1996 to Friday 10 November 2006. A regression-based approach is employed. The results indicate that marketwide returns are significantly higher in April, July and December combined with evidence of a small cap effect with systematically higher returns in January, August and December. The analysis of the sub-market returns is also partially supportive of disparate month-of-the-year effects in the diversified financials, energy, retail, telecoms and transport industries. However, only in the case of small cap firms and the telecoms industry do these coincide with the higher returns associated with the January effect as typified in work elsewhere.

Keywords: calendar effects, market anomalies, market efficiency

JEL Classification: C12, C22, G14