Seasonality in the Korean stock market

Abstract

This thesis examines what makes the seasonality and seasonal reversal in the Korean stock market. We analyze seasonality by constructing seasonality and seasonal reversal factors based on average same-month returns and average other-month returns in monthly data. We find that seasonality and seasonal reversal exist in the Korean stock market. Also, we provide evidence that seasonality contains information independent of the one in seasonal reversal, which implies that the mispricing hypothesis cannot fully explain the seasonality. To see the relation with the business cycle, we investigate the relation of the seasonality at quarterly data with return on equity, earnings per share and sales per share. Sales per share predicts stock returns well and have seasonality but does not have any relation with monthly seasonality.