Firm Size, Stock Return Seasonality, and the Trading Pattern of Individual and Institutional Investors: The Canadian Experience

Abstract

Consistent with U.S. evidence showing a significant January effect, Canadian stocks, both large and small, are found to exhibit a strong first quarter seasonal effect. Evidence appears to support the hypothesis that the behavior of institutional investors explains this effect to some extent for both large- and small-cap stocks. Individual investors seem to be the marginal traders whose trades affect the prices of small stocks in all but the first quarter. The findings have implications for market efficiency as well as for identifying the best times that portfolio managers and brokers aggressively approach potential customers.

JEL Classification: G12