Mood Beta and Seasonalities in Stock Returns
David Hirshleifer, Danling Jiang, and Yuting Meng
October 2018.
Abstract:
Existing research has documented cross-sectional seasonality of stock returns—the periodic outperformance of certain stocks during the same calendar months or weekdays. A model in which assets differ in their sensitivities to investor mood explains these effects and implies other seasonal patterns. We find that relative performance across individual stocks or stock portfolios during past high or low mood months and weekdays tends to recur/reverse in periods with congruent/noncongruent mood. Furthermore, assets with higher sensitivities to aggregate mood—higher mood betas—subsequently earn higher/lower returns during high/low mood periods, including those induced by Daylight Saving Time changes, weather conditions and anticipation of major holidays.
