Revisiting the Monthly Effect for the Chinese Stock Markets

Chin Shan Hsieh

Abstract


This study uses stochastic dominance (SD) theory, a distribution-free, omitted risk-adjusted method and allowing investors to allocate their assets between risky and risk-free assets, to test whether the monthly effect exists in the Chinese stock markets. The results show that March effect and March size effect are found in the Chinese markets, which findings are obviously different from the January effect and January size effect in the US and some developed markets. Consumption inertial hypothesis is used to explain the particular phenomena in the Chinese markets. Compared with previous findings, our empirical results in the Chinese markets also suggest that second-order SD with a risk-free asset (SSDR) for March effect replaces first- or second-order SD (FSD or SSD) for January effect in the US and some Asian markets, which result implies that allocating investor’s assets between risky and risk-free assets can help distinguish the performance among the calendar months.


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DOI: https://doi.org/10.11114/aef.v3i2.1271

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Applied Economics and Finance    ISSN 2332-7294 (Print)   ISSN 2332-7308 (Online)

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