1. Behavioral Finance
Economics 437

2. Haugen-Baker, 1996 Great summary of the literature A Grand Synthesis
Use multi-factor model to create a “generalized” value portfolio
Incorporate J-T effects
20 percent outperformance for H-B synthesis
Data used from five countries: France, Germany, Japan, UK, US

3. Hanna-Ready, 2005
Dispute H-B results due to monthly turnover (40 percent) in HB rebalancing (causes high transaction costs)
Conclude that six month rebalancing of F-F portfolios is best
Most of H-B results come from J-T. J-T results fall if transaction costs considered
Cannot explain why F-F does so well

4. Cooper, McConnell, Ovtchinnikov
“We find that January has predictive power for two of the three premiums in the Fama-French three-factor model of asset pricing.”
Data

5. Lakonishok and Smidt 1988
“Are Seasonal Anomalies Real? A Ninety Year Perspective?
Data from daily closes of DJ from 1897 to 1986
Theory as protection agst data snooping….
Interesting data facts
No stock market from Aug 1 to Dec 12 in 1914
Saturday trading until June 1, 1952
Results
No January effect for large stocks (high market cap stocks)
First half of the month not significantly “better” than 2nd half of the month
Blue Monday; Last trading date of the week positive
Positive “day before holiday” effect; holiday effect twide end of week effect; rates negative after holidays
Pre-Xmas negative; post-Xmas positive
Turn of the month effect

6. The End