The Sell-in-May Effect in International Stock Markets
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Abstract Several studies have presented evidence for higher returns in stock markets from the beginningof November to the end of April compared to the rest of the year. This phenomenon is wellknown as the Sell-in-May effect. The main focus of this thesis is to investigate whether the Sellin-May effect still exists in financial markets and whether the power of the effect deviatesbetween time and markets. Additionally, we investigate discrepancies in risk and returnbetween the summer and winter months, as well as the January effect, in order to examinewhether these explanations could help us understand the existence of the Sell-in-May effect. Inan effort to examine if the investors could exploit and profit from the market anomaly, wedeveloped and simulated a trading strategy based on the Sell-in-May effect and performedvarious statistical tests against the Buy-and-Hold benchmark strategy. The output from theregression model showed evidence of an existing Sell-in-May effect. Neither the January effectnor differences in risk proved to be viable explanations for the existence of the effect. Furtherresults indicated that the Sell-in-May strategy outperformed the Buy-and-Hold strategy in mostscenarios, indicating that investors could exploit and profit from the market anomaly.