Running head: SEASONALITY IN GOVERNMENT BOND RETURNS

Seasonality in Government Bond Returns and Factor Premia

Adam Zaremba

Poznan University of Economics and Business

Tomasz Schabek

University of Lodz

Author’s Note

This paper is part of project No. 2015/19/B/HS4/00378 financed by the National

Science Centre of Poland.

Correspondence concerning this article should be addressed to Adam Zaremba,

Department of Investment and Capital Markets, Poznan University of Economics and Business,

al. Niepodleglosci 10, 61-875 Poznan, Poland, e-mail: adam.zaremba@ue.poznan.pl.

First draft: 24th August 2016

This version: 6th December 2016

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SEASONALITY IN GOVERNMENT BOND RETURNS

Abstract

The study investigated both the January effect and the "sell-in-May-and-go-away" anomaly in

government bond returns. It also tested whether the two seasonal patterns impact the

performance of fixed-income factor strategies related to volatility, credit risk, value, and

momentum premia. Our examination of government bond markets in 25 countries for years

1992-2016 proved that both the bond returns and factor premia had remained unaffected by the

January and "sell-in-May" effects. These seasonal patterns in government bond markets appear

to be merely a statistical artefact.

Keywords: seasonal anomalies, calendar anomalies, January effect, sell in May and go

away, Halloween indicator, government bonds, sovereign bonds, fixed-income securities.

JEL codes: G12, G14, G15.

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SEASONALITY IN GOVERNMENT BOND RETURNS

Seasonality in Government Bond Returns and Factor Premia

Recent years have brought numerous academic studies devoted to finding

commonalities in cross-sectional return patterns across various asset classes. The value effect -

the tendency of low-priced assets to outperform high-priced securities - which first originated

from equity markets, have now been found in: commodities, fixed income, and bonds (Asness,

Moskowitz, & Pedersen, 2013). The low-volatility effect - the tendency of risky assets to

underperform - has been proven in: equities, fixed income, and commodities (Frazzini and

Pedersen, 2014), and another widely respected cross-sectional effect: momentum, - the

tendency of assets successful in the past to continue to outperform in the future - has also been

found across all major asset classes (Asness, Moskowitz, & Pedersen, 2013). Finally, in 2015

Koijen, Moskowitz, Pedersen, and Vrugt demonstrated that the carry strategy - assuming

overweighting high-yielding assets over low-yielding assets - could be successfully

implemented in equities, fixed-income, commodities and currencies. The fundamental question

underpinning all these studies probes the integration of global financial markets and the

implications for the increasing return co-movements.

In comparison to the common strategies based on value, momentum, carry, and low-

risk, the seasonal patterns have been most comprehensively studied in equities whereas other

asset classes have yet to be covered by such extensive research, with government bonds in

particular appearing to have slipped the attention of the academic community. Thus, the primary

goal of this study was to bridge this gap by conducting a comprehensive examination of

seasonal patterns in international government bond returns.

We focused on two well-documented seasonal anomalies: the January effect and the

"sell-in-May-and-go-away" pattern. The January effect is the tendency of stock market

companies to display particularly high returns in January. The evidence thereof dates back to

the studies of Wachtel (1942), Rozeff and Kinney (1976), and has been reconfirmed in more

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SEASONALITY IN GOVERNMENT BOND RETURNS

recent and long-term samples (Haug & Hirschey, 2006). The "sell-in-May-and-go-away-effect"

(in short: "sell-in-May", also referred to as the Halloween indicator) is reflected in the

outperformance of stocks within the period from November to April relative to the remainder

of the year. The phenomenon, originally identified by Bauman and Jacobsen (2002) across 36

equity markets, has been since confirmed in broader and longer samples by Castro and Schabek

(2014) or Jacobsen and Zhang (2014). Here we extended the research on these seasonal

anomalies to include international government bonds.

The theoretical motivation of this study stems from the "parking-the-proceeds"

explanation of the January effect offered by Ritter (1988), according to which the returns in

January can be driven by the inflow of money from the bond markets where the capital was

temporarily "parked". Thus, the abnormal positive returns in January should coincide with the

capital outflow from the bond markets, effectively implying abnormal negative returns on

government bonds in January. In this study, we extended this explanation to include the "sell-

in-May" anomaly, checking whether the positive abnormal equity returns within the period

November-April coincide with abnormal negative returns in government bonds.

While the January and "sell-in-May" effects may impact the government bond returns,

they may not exert similar influence on all market segments. For example, Clayton, Delozier,

and Ehrhardt (1989) suggested that the magnitude of the January effect might depend on the

bond maturity. Thus, if the January effect impacts only some segments of fixed-income

securities, it might potentially influence the cross-sectional patterns in bond returns. In

consequence, we were also interested whether both the January and "sell-in-May" anomalies

be reflected not only in raw returns, but also in government bond factor premia. In equities, the

January effect has been investigated in relation to: the size effect (e.g., Horowitz, Loughran, &

Savin, 2000), value effect (e.g., Davis, 1994; Loughran, 1997), and momentum (e.g., Jegadeesh

& Titman, 2001; Yao, 2012, Zaremba, 2015). Here, we considered four grant government bond

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SEASONALITY IN GOVERNMENT BOND RETURNS

return factors: volatility, credit risk, value, and momentum and tested their performance in the

January and "sell-in-May" patterns in the time series of returns.

This study aims to contribute by providing new insights into asset pricing of

international government bonds. To the best of our knowledge, it is the first paper to examine

comprehensively the January effect in broad international government bond markets. In

addition, no study to date has investigated the "sell-in-May" effect in government bonds or

researched the seasonal patterns in government bond factor premia. The results bear

implications for both academic and practical purposes. First, they allow to understand the

behaviour of government bond returns, and could also be viewed as a test of informational

efficiency in international bond markets in terms of seasonal anomalies. Second, they verify

the implications of the "parking-the-proceeds" hypothesis by Ritter (1988). Third, the results

might help to design optimal asset pricing factors for multi-factor models to explain the cross-

section of government bond returns. 1 Fourth, the outcomes can be utilised by market

practitioners to design better market timing strategies.

The study is related to three branches of academic literature: (1) regarding

commonalities in asset-pricing patterns across different asset classes (Asness, Moskowitz, &

Pedersen, 2013; Frazzini and Pedersen, 2014; Koijen, Moskowitz, Pedersen, and Vrugt, 2015;

Zaremba, 2016), (2) regarding seasonal patterns in anomalies and factor premia (Davis, 1994;

Loughran, 1997; Horowitz, Loughran, & Savin, 2000; Jegadeesh & Titman, 2001; Yao, 2012;

Zaremba, 2015), and - most importantly - (3) regarding the seasonal patterns in government

bond behaviour (Schneeweis & Woolridge, 1979; Smirlock, 1985; Chang & Pinegar, 1986;

1
For example, the momentum factor in equities is frequently based on the trailing return for the 12-month period

in order to disentangle the influence of seasonal patterns in cross section of returns. The question whether

analogous design should be applied for government bonds remains open.

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SEASONALITY IN GOVERNMENT BOND RETURNS

Clayton, Delozier, & Ehrhardt, 1989; Clare & Thomas, 1992; Chan & Wu, 1993, 1995; de

Vassal, 1998; Lavin, 2000; Chieffe, Cromwell, & Yoder, 2000; Smith, 2000, 2006). Generally,

the existing evidence concerning seasonal patterns in government bonds remains inconclusive.

The single-country studies of Schneeweis & Woolridge (1979), Smirlock (1985), Chang and

Pinegar (1986), Clayton, Delozier, and Erhardt (1989), and Lavin (2000) have found significant

evidence for seasonality, yet the broader international investigations, including Clare and

Thomas (1992), provide mixed results.

Summarising the principal findings of this study, we identified the January effect in the

returns on Italian government bonds which outperformed in a given month although the

empirical data failed to provide consistent evidence of this patterns in the 24 out of 25 countries

we studied. The "sell-in-May" anomaly was reflected in abnormally low returns within the

period from November to April in Canada, the United States, and partly Australia, yet it failed

to appear in the 22 of 25 markets. Summing up, the aggregate tests proved that both the January

and "sell-in-May" patterns played a minor role in international government bond returns.

Furthermore, also the factor premia appeared unaffected by the seasonal patterns. The data

revealed no abnormal returns on volatility, credit risk, value, or momentum strategies related

to the January and "sell-in-May" effects.

The remainder of the study is divided into Section II, presenting our data sample and

research methods employed, Section III, discussing the results, and Section IV, which

concludes the paper.

Data and Methods

As the study aimed to investigate seasonal patterns in government bond returns and

factor premia, we examined the returns on bond buckets using a regression analysis, formed

synthetic volatility, credit risk, value, and momentum strategies, and evaluated their

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SEASONALITY IN GOVERNMENT BOND RETURNS

performance with analogous procedures. In this section, firstly, we outline our data sample.

Next, we discuss the design of factor portfolios, and we describe the regression-based tests.

Data Sources and Sample Preparation

This research was based on Bloomberg/EFFAS Total Return Bond Indices for 25

countries for the period January 1992 - June 2016. The sample encompassed all of the countries

and the entire period covered by Bloomberg/EFFAS. The indices were calculated separately

for five different maturity buckets: 1-3 years, 3-5 years, 5-7 years, 7-10 years, and over 10

years, in total, investigating 125 international government bond buckets. This made this sample

considerably broader then the former studies of return patterns in international government

bonds, which include Asness, Moskowitz, and Pedersen (2013), who researched 10 countries,

Frazzini and Pedersen (2014), covering 9 countries, and Beekhuizena, Duyvesteyna, Martens,

and Zomerdijk (2016), targeting 10 countries. To its further advantage, our sample included a

unique default event: Greece, and the necessary additional characteristics of the government

bond indices: e.g. the average duration or aggregate market value found in the Bloomberg

database.

The calculations were based on monthly returns. This offers a compromise between

ensuring a considerable number of observations for statistical interfering and avoiding the

impact of microstructure issues, which can in turn influence daily intervals. In order to use a

consistent currency approach across multiple markets and at the same time to disentangle the

currency and bond returns, we utilised returns hedged against US dollar.2 We collected data in

local currencies, and then adjusted them for hedging costs based on the 1-month forward points

quoted by Bloomberg. Table 1 provides an overview of our research sample.

2
For robustness, we also examined unhedged returns and we found no qualitative differences in results.

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SEASONALITY IN GOVERNMENT BOND RETURNS

Table 1. Research Sample

1Y–3Y 3Y–5Y 5Y–7Y 7Y–10Y 10Y+

Country
R Vol N R Vol N R Vol N R Vol N R Vol N
Australia 0.31 0.62 294 0.38 1.09 294 0.45 1.40 294 0.50 1.80 294 0.57 2.25 294
Austria 0.32 0.42 294 0.43 0.77 294 0.51 1.07 294 0.57 1.37 294 0.52 2.55 294
Belgium 0.36 0.49 294 0.47 0.85 294 0.57 1.13 294 0.63 1.52 294 0.76 2.36 294
Canada 0.36 0.58 294 0.44 1.02 294 0.52 1.29 294 0.58 1.61 294 0.71 2.25 294
Czechia 0.29 0.42 198 0.43 0.90 198 0.34 1.59 198 0.58 1.73 198 0.60 2.33 198
Denmark 0.33 0.53 294 0.42 0.91 294 0.50 1.21 294 0.58 1.56 294 0.75 2.69 294
Finland 0.36 0.55 294 0.45 0.94 294 0.58 1.17 292 0.63 1.60 266 0.62 2.12 275
France 0.32 0.44 294 0.43 0.80 294 0.51 1.11 294 0.59 1.44 294 0.75 2.47 294
Germany 0.32 0.42 294 0.43 0.76 294 0.52 1.07 294 0.58 1.37 294 0.74 2.62 294
Greece -0.12 4.35 198 0.01 4.69 198 -0.01 4.29 198 0.18 5.61 198 1.02 7.04 198
Hungary 0.66 1.11 198 0.71 1.99 198 0.65 2.48 198 0.83 3.19 198 0.72 3.62 198
Ireland 0.39 1.21 294 0.53 1.85 294 0.43 1.84 294 0.64 2.47 294 0.73 2.94 294
Italy 0.48 0.78 294 0.60 1.32 294 0.70 1.67 294 0.75 2.02 294 0.83 2.73 270
Japan 0.11 0.29 294 0.21 0.62 294 0.29 0.92 294 0.36 1.23 294 0.53 1.87 294
the Netherlands 0.34 0.41 294 0.45 0.75 294 0.54 1.06 294 0.61 1.39 294 0.76 2.47 294
New Zealand 0.26 0.54 294 0.30 0.94 294 0.31 1.40 294 0.44 1.67 290 0.42 1.79 294
Norway 0.13 1.44 294 0.28 0.95 294 0.36 1.79 292 0.49 1.59 288 -0.07 2.42 251
Poland 0.26 0.55 198 0.33 1.27 198 0.17 1.50 198 0.43 2.23 198 0.30 2.47 198
Portugal 0.50 1.53 272 0.59 2.64 272 0.55 3.37 272 0.70 3.27 272 0.52 3.78 212
South Africa 0.18 0.72 198 0.15 1.19 198 0.22 1.74 198 0.20 2.15 198 0.41 3.07 198
Spain 0.47 0.81 294 0.58 1.29 294 0.67 1.67 278 0.73 2.06 294 0.76 2.75 267
Sweden 0.34 0.51 294 0.44 0.95 294 0.52 1.29 294 0.60 1.74 294 0.72 2.55 294
Switzerland 0.34 0.40 258 0.42 0.66 274 0.49 0.86 274 0.56 1.16 274 0.68 1.99 274
UK 0.36 0.57 294 0.44 0.93 294 0.51 1.27 294 0.56 1.66 294 0.68 2.52 294
USA 0.32 0.46 294 0.43 1.02 294 0.50 1.36 294 0.55 1.79 294 0.71 2.85 294

Note. The table presents the research sample of international government bonds buckets. R is the mean monthly arithmetic return; Vol the standard deviation of monthly returns,
and N a number of monthly observations (returns). The columns' headlines indicate maturities of bonds within the buckets stated in years (Y): 1-3, 3-5, 5-7, 7-10, and over 10
years.

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SEASONALITY IN GOVERNMENT BOND RETURNS

All other data adopted in this study, e.g. sovereign ratings, or macroeconomic data, are

also sourced from Bloomberg. For cash rates, we closely followed the argumentation of

Beekhuizena, Duyvesteyna, Martens, and Zomerdijk (2016), using the 1-month Eurocurrency

rate. The rates seem the most relevant to bond investors, as only governments can attain

financing at the T-bill rate. Furthermore, the implied interest rate differentials in FX forwards,

which are used to hedge currency risk, approximate differences between Eurocurrency rates.

The final benefit of the Eurocurrency rates is its better data coverage compared to the

international T-bill rates.

Factor Premia in International Government Bonds

We calculated 23 various factor portfolios related to 4 broad determinants of

government bond returns: volatility, credit risk, value effect, and momentum premium. In the

case of each factor, we observed a uniform portfolio formation procedure which was consistent

across all of the returns patterns. Thus, each month we ranked all bond buckets based on a

sorting variable related to the return determinant. Next, we formed zero-investment portfolios

that were long (short) in the quantile of buckets with the highest (lowest) variable. To assure

the robustness of the results, we used three different types of quantiles: tertiles, quartiles, and

quintiles. Furthermore, we utilised two distinct weighting methods: equal and based on value.

All of the portfolios were reformed on a monthly basis.

In the first category of factor portfolios - volatility - we employed seven sorting

variables: (1) adjusted duration, (2) beta estimated against the value-weighted portfolio of all

of 125 bond buckets, (3) idiosyncratic volatility from the regression on the value-weighted

portfolio of all 125 bond buckets, (4) standard deviation of monthly returns, (5) empirical value

at risk with a 5% threshold, (6) downside deviation of monthly returns, and (7) duration-times-

yield measure, i.e. the portfolio duration multiplied by its yield to maturity, following de

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SEASONALITY IN GOVERNMENT BOND RETURNS

Carvalho, Dugnolle, Lu, and Moulin (2014). The variables (2)-(6) were estimated based on the

trailing 60 monthly returns.

The second category of factors - credit risk - encompassed four alternative measures.

First, we calculated a simple average of cross-sectional z-scores of budget deficit-to-GDP and

net debt-to-GDP ratios (8). Second, we used the sovereign risk assessments provided by the

Economist Intelligence Unit (9). Third, we employed an average sovereign bond rating from

Moody's, S&P and Fitch (10).3 Finally, we also considered the total market value of all the

bonds within a given bucket (11). Naturally, this measure is not strictly related to credit risk,

but as the developed markets have generally more sovereign debt outstanding, we decided to

include this variable in the credit risk category.

The measurement of the value effect in government bonds, which is covered by the third

category of our factors, proves elusive and inconsistent across academic papers. For example,

Asness, Moskowitz, and Pedersen (2013) adopted the 60-month trailing return arguing this

measure to be strongly correlated with book-to-market ratio in the case of individual stocks. On

the other hand, Asness, Ilmanen, Israel, and Moskowitz (2015) advocated the yield to maturity

adjusted for expected inflation. This is also closely related to the concept of bond carry, usually

calculated as the difference between bond yield to maturity and some short-term cash rate

(Koijen, Moskowitz, Pedersen, & Vrugt, 2015). Finally, stock market practitioners usually

employ some relative value techniques which relate the expected yield to various underling risk

factors. Thus, to assure the robustness of our tests we employed a range of approaches. The first

two variables were: yield-to-maturity (12) and term premium (13), i.e. difference between the

yield-to-maturity and 1-month Eurocurrency rate in the analysed country. We also considered

three relative value approaches, under which the markets were sorted on the residuals of the

3
Precisely, we ranked all the ratings from the three rating agencies from 1 to 24 and then used an averaged ranking
value.

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SEASONALITY IN GOVERNMENT BOND RETURNS

term premium (see [13]) regressed on another risk factor. Thus, we used relative value ([14],

residuals from the regression on adjusted duration as in [1]), credit relative value (([15],

residuals from the regression on averaged credit rating as in [10]), and term-and-credit relative

value ([16], residuals from a multiple regression on adjusted duration and averaged credit

rating). Finally, we also adopted long-term 48-month yield change (17), as advocated by

Asness, Moskowitz, and Pedersen (2013).

The fourth category of variables is momentum, i.e. the tendency of assets that performed

well (poor) in the past to continue to outperform (underperform) in the future. The phenomenon

was identified in government bonds by Luu and Yo in 2012 and Duyvesteyn and Martens

(2014) and others. For momentum we adopted 6 alternative definitions: 6-month and 12-month

price change (18, 19), i.e. the percentage change in price over past 6 and 12 trailing months, 6-

month and 12-month yield change (20, 21), i.e. the nominal change in yield to maturity over

past 6 and 12 trailing months, and the relation of current price to its 6-month (22) and 12-month

(23), i.e. the moving average estimated from the monthly data.

Table 2 provides an overview of the profitability of the performance of the zero-

investment portfolios considered in this study. The volatility was clearly positively related to

future returns and the zero-cost portfolios displayed mean positive and significant mean

monthly returns ranging from 0.24% to 0.49%, depended on a given portfolio construction

approach. The credit premium was much less consistent and mostly insignificant. Interestingly,

the profitability of this factor had been doubted in many earlier studies (see Asvanunt and

Richardson [2016] for discussion). The value strategies proved profitable and highly

significant., The momentum strategies displayed positive and significant returns in nearly all

alternative definitions and across multiple portfolio construction methods while the worst

performing portfolios were sorted on the long-run past return (17).

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SEASONALITY IN GOVERNMENT BOND RETURNS

Table 2. Mean Monthly Returns on Zero-Investment Government Bond Portfolios

Equal-weighted portfolios Value-weighted portfolios

No. Sorting variable Tertiles Quartiles Quintiles Tertiles Quartiles Quintiles
R t-stat R t-stat R t-stat R t-stat R t-stat R t-stat
Volatility
1 Adjusted duration 0.27*** (3.68) 0.32*** (3.72) 0.36*** (3.76) 0.28*** (3.61) 0.31*** (3.70) 0.32*** (3.51)
2 Beta 0.24*** (3.09) 0.27*** (2.93) 0.31*** (2.96) 0.37*** (4.02) 0.42*** (3.92) 0.48*** (4.21)
3 Idiosyncratic volatility 0.31*** (3.57) 0.35*** (3.42) 0.39*** (3.40) 0.37*** (3.53) 0.43*** (3.53) 0.45*** (3.42)
4 Standard deviation 0.29*** (3.53) 0.33*** (3.41) 0.37*** (3.39) 0.36*** (3.69) 0.41*** (3.65) 0.42*** (3.52)
5 Value at risk 0.33*** (4.15) 0.37*** (4.15) 0.40*** (4.02) 0.38*** (3.80) 0.41*** (3.79) 0.45*** (3.86)
6 Downside deviation 0.30*** (3.59) 0.33*** (3.40) 0.36*** (3.33) 0.37*** (3.86) 0.39*** (3.62) 0.44*** (3.72)
7 Duration-time-yield 0.32*** (3.82) 0.37*** (3.87) 0.41*** (3.91) 0.43*** (4.21) 0.49*** (4.17) 0.51*** (4.16)
Credit risk
8 Budget deficit & net debt 0.07 (1.17) 0.08 (1.29) 0.13* (1.75) -0.11*** (-2.90) -0.11*** (-2.79) -0.09** (-2.23)
9 EIU sovereign risk 0.06 (0.70) 0.08 (0.76) 0.08 (0.70) 0.02 (0.22) 0.03 (0.25) -0.04 (-0.41)
10 Credit rating 0.08 (1.20) 0.12 (1.43) 0.14 (1.55) 0.03 (0.45) 0.02 (0.23) 0.00 (0.03)
11 Market value 0.09* (1.73) 0.08 (1.61) 0.10* (1.79) 0.16*** (3.36) 0.13*** (2.65) 0.14*** (2.64)
Value
12 Yield-to-maturity 0.26*** (3.71) 0.30*** (3.60) 0.34*** (3.61) 0.40*** (4.01) 0.46*** (3.98) 0.45*** (3.82)
13 Term premium 0.41*** (6.47) 0.47*** (6.29) 0.49*** (5.70) 0.41*** (4.30) 0.47*** (4.28) 0.48*** (3.85)
14 Term relative value 0.31*** (5.11) 0.36*** (4.90) 0.40*** (4.61) 0.34*** (4.35) 0.39*** (4.16) 0.38*** (3.49)
15 Credit relative value 0.34*** (4.83) 0.41*** (4.95) 0.44*** (4.85) 0.36*** (3.89) 0.40*** (3.69) 0.45*** (3.82)
16 Term & credit relative value 0.25*** (4.41) 0.29*** (4.36) 0.33*** (4.15) 0.31*** (3.91) 0.37*** (3.90) 0.37*** (3.56)
17 48-month yield change 0.17** (2.51) 0.17** (2.21) 0.18** (2.03) 0.12** (2.20) 0.09 (1.48) 0.12 (1.47)
Momentum
18 6-month price momentum 0.25*** (3.88) 0.28*** (3.68) 0.30*** (3.38) 0.20** (2.29) 0.24** (2.35) 0.20* (1.86)
19 12-month price momentum 0.21*** (3.41) 0.24*** (3.33) 0.27*** (3.32) 0.29*** (3.46) 0.33*** (3.32) 0.36*** (3.23)
20 6-month yield momentum 0.11** (2.11) 0.12* (1.95) 0.12* (1.74) 0.08 (1.14) 0.09 (1.30) 0.10 (1.27)
21 12-month yield momentum 0.06 (1.14) 0.07 (1.10) 0.07 (1.03) 0.17** (2.57) 0.20*** (2.59) 0.23** (2.56)
22 6-month moving average 0.27*** (3.75) 0.30*** (3.56) 0.33*** (3.47) 0.18** (1.96) 0.20* (1.88) 0.19 (1.54)
23 12-month moving average 0.26*** (4.13) 0.30*** (4.07) 0.33*** (4.06) 0.23*** (2.66) 0.24** (2.41) 0.26** (2.28)
Note. Table reports mean monthly returns (R) along with corresponding bootstrap t-statistics (t-stat) on zero-investment long/short portfolios of government bonds. The portfolios
are long (short) in the quintiles, quartiles, or tertiles of bond buckets of the highest (lowest) factor variables, as described in the Methods section. Means are expressed as
percentages. Asterisks *, **, and *** indicate values significantly different from zero at the 10%, 5%, and 1% level, respectively.

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SEASONALITY IN GOVERNMENT BOND RETURNS

Testing for Seasonal Patterns

In order to examine the January and "sell-in-May" seasonal patterns in returns we

followed the regression-based approach frequently employed in previous studies of seasonal

patterns, including Bouman and Jacobsen (2002) or Castro and Schabek (2014). Using the

ordinary least squares method, we estimated the parameters of the following regression

equations:

, (1)

, (2)

where rit is the log-return on i (i.e. the asset in month t), εit is the standard error, and αiJAN, βiJAN,

αiMAY, and βiMAY are the regression parameters. JANt is a dummy variable of 1 when month t is

January, or 0 otherwise. Analogously, MAYt is a dummy variable of 1 when month t is

November, December, January, March, or April, or 0 otherwise. Thus, the βiJAN and βiMAY

parameters could be interpreted as the average abnormal returns in January and correspondingly

within the period November-April. Finally, for each asset we tested the null hypotheses, where

the βiJAN and βiMAY parameters equaled 0 and the alternative hypothesis assuming the contrary.

In all cases, the parameters with the corresponding t-statistics were based on the Newey-West estimator

(Newey and West, 1987).

Finally, as we were also interested whether the January or "sell-in-May" returns would

significantly depart from zero on average within a group of countries or bond buckets, we

developed a bootstrap test (abbreviated BT) to investigate this issue. The BT test was based on

a bootstrap approach in which new samples were randomly drawn with replacement from the

original sample of the monthly portfolio log-returns. Where {rit, t=1, ..., T; i=1, ,2, ..., N) be the

original set of log-returns recorded for N assets over T time periods. Using the stationary

bootstrap of Politis and Romano (1994) we randomly draw (with replacement) a new sample

of log-returns {(b)ir(t), τ(1), ..., τ(T), i=1, 2, ..., N}, where τ(t) was the new time index, a random

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SEASONALITY IN GOVERNMENT BOND RETURNS

draw from the original set {1, ..., T}. In other words, τ(t) was a randomised index common

across portfolios employed to preserve any cross-sectional dependencies in returns. Finally, b

was the indicator for the bootstrap number which ran from b=1 to B. We used 10,000 bootstrap

replications B to conduct the tests.

Next, for each draw b we conducted N regression to obtain βiJAN or βiMAY coefficients

(dependant on the seasonality thus researched) for each of the N assets. Subsequently, we

calculated a simple arithmetic mean of the N regression coefficients and repeated the procedure

B=10,000 times. As the theories investigated in this study imply that the returns in the examined

periods could be abnormally low, our null hypothesis in the BT tests assumed that the average

regression coefficient βiJAN/MAY be higher or equal to zero with the alternative assuming the

contrary:

H0: βiJAN/MAY  0 (3)

vs. H1: βiJAN/MAY < 0.

To obtain the p-value for the test we counted a number of cases for which βiJAN/MAY < 0

and divided it by the number of bootstraps B.

Results

Table 3 reports the βiJAN regression coefficients across the 25 countries and 5 maturity

buckets. Clearly, the results indicate no January effect in government bond returns. The βiJAN

usually insignificantly departed from zero while their absolute value was relatively low. As this

observation holds true across all the maturity buckets, our results contradict the observations of

Clayton, Delozier, and Ehrhardt (1989), who found the January returns to be abnormally high

for short-term bonds and abnormally low for long-term bonds.

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SEASONALITY IN GOVERNMENT BOND RETURNS

Table 3. The January Effect in Government Bond Returns

1Y–3Y 3Y–5Y 5Y–7Y 7Y–10Y 10Y+

βiJAN t-stat βiJAN t-stat βiJAN t-stat βiJAN t-stat βiJAN t-stat
Australia -0.05 (-0.55) -0.11 (-0.78) -0.14 (-0.79) -0.12 (-0.43) -0.02 (-0.05)
Austria 0.10 (1.19) 0.17 (1.06) 0.25 (1.11) 0.37 (1.23) 0.84 (1.63)
Belgium 0.17* (1.88) 0.34** (2.01) 0.36 (1.50) 0.49 (1.46) 0.67 (1.19)
Canada 0.05 (0.43) 0.04 (0.20) 0.00 (-0.02) -0.06 (-0.16) -0.26 (-0.46)
Czechia 0.10 (0.88) 0.21 (0.99) 0.30 (0.97) 0.24 (0.53) 0.29 (0.47)
Denmark 0.14 (1.20) 0.22 (1.05) 0.29 (1.02) 0.33 (0.94) 0.50 (0.81)
Finland 0.03 (0.33) 0.07 (0.43) -0.07 (-0.29) 0.11 (0.31) -0.14 (-0.26)
France 0.05 (0.46) 0.15 (0.84) 0.20 (0.85) 0.35 (1.19) 0.68 (1.28)
Germany 0.08 (0.94) 0.15 (0.88) 0.22 (0.87) 0.35 (1.12) 0.78 (1.36)
Greece -0.96 (-1.24) -1.18 (-1.23) 0.97 (1.17) -0.89 (-0.80) -0.79 (-0.73)
Hungary 0.33 (1.44) 0.23 (0.56) 0.14 (0.27) 0.42 (0.51) -0.26 (-0.25)
Ireland 0.30 (1.47) 0.27 (0.87) 0.81** (2.24) 0.65 (1.26) 0.70 (1.14)
Italy 0.39*** (2.74) 0.63*** (2.62) 0.85*** (2.82) 0.95*** (2.82) 1.28*** (2.61)
Japan -0.02 (-0.32) -0.08 (-0.51) -0.17 (-0.75) -0.16 (-0.64) -0.23 (-0.58)
the Netherlands 0.10 (1.11) 0.16 (0.89) 0.19 (0.80) 0.26 (0.84) 0.57 (0.98)
New Zealand 0.21* (1.92) 0.23 (1.53) 0.42* (1.90) 0.27 (0.95) 0.09 (0.24)
Norway -0.81 (-0.92) 0.32 (1.56) 0.20 (0.44) 0.55* (1.68) 0.70* (1.66)
Poland 0.04 (0.31) -0.02 (-0.07) -0.23 (-0.57) -0.16 (-0.31) -0.59 (-0.87)
Portugal -0.33 (-0.66) -0.75 (-0.73) -0.77 (-0.69) -0.38 (-0.37) -0.72 (-0.53)
South Africa -0.01 (-0.05) -0.30 (-0.80) -0.20 (-0.40) -0.18 (-0.27) -0.15 (-0.17)
Spain 0.34*** (2.87) 0.51*** (2.73) 0.42 (1.58) 0.72** (2.05) 0.44 (0.72)
Sweden 0.00 (-0.03) 0.05 (0.27) 0.07 (0.26) 0.12 (0.30) 0.32 (0.51)
Switzerland 0.04 (0.55) 0.10 (0.78) 0.21 (1.08) 0.16 (0.57) 0.04 (0.08)
UK 0.10 (0.91) 0.15 (1.03) 0.06 (0.25) 0.03 (0.10) -0.18 (-0.27)
USA 0.14 (1.38) 0.29 (1.47) 0.32 (1.16) 0.27 (0.71) 0.24 (0.33)

Note. Table reports the results of the examination of the January effect in international government bond returns.
The columns' headlines indicate maturities of bonds within given buckets expressed in years (Y): 1-3, 3-5, 5-7, 7-
10, and beyond 10 years. βiJAN is the regression coefficient from the equation (1) and t-stat is the corresponding
Newey-West (1987) adjusted t-statistics. Asterisks *, **, and *** indicate values significantly different from zero
at the 10%, 5%, and 1% level, respectively.

Nonetheless, we noted a small number exceptions where January returns indeed

displayed abnormal returns. For example, in Italy the January payoffs were abnormally high

across all the maturities, outperforming the other months by 0.39-1.29%. The exceptionally

high returns at the beginning of the year were also observable in some maturities in: Belgium,

Ireland, New Zealand, Norway, and Spain. However, the return patterns in these cases were less

consistent than in Italy. Interestingly, while the abnormal returns in these instances were indeed

significant, they were also positive: in other words, these patterns were analogous to the January

effect in equity markets and contradicted the hypotheses in this study. Importantly, the few cases

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SEASONALITY IN GOVERNMENT BOND RETURNS

of abnormal returns across 125 bond buckets can constitute no basis for reliable and robust

statistical inferences, so the results presented in Table 3 fail to support the "parking-the-

proceeds" hypothesis.

Table 4 presents the regression coefficients reflecting the "sell-in-May-and-go-away"

anomaly. Differently than in Table 3, many of the coefficients are negative. The majority,

however, remain insignificant.

Table 4. The "Sell-in-May" Effect in Government Bond Returns

1Y–3Y 3Y–5Y 5Y–7Y 7Y–10Y 10Y+

βiMAY t-stat βiMAY t-stat βiMAY t-stat βiMAY t-stat βiMAY t-stat
Australia -0.09 (-1.28) -0.21* (-1.68) -0.30** (-1.97) -0.41** (-1.98) -0.47* (-1.80)
Austria -0.02 (-0.33) -0.05 (-0.56) -0.12 (-0.97) -0.16 (-1.09) 0.03 (0.09)
Belgium 0.00 (-0.04) 0.00 (-0.05) -0.04 (-0.35) -0.01 (-0.07) -0.01 (-0.02)
Canada -0.12* (-1.70) -0.25** (-2.02) -0.33** (-2.17) -0.41** (-2.36) -0.53** (-2.21)
Czechia 0.02 (0.36) -0.02 (-0.14) 0.13 (0.53) -0.09 (-0.36) -0.23 (-0.72)
Denmark 0.05 (0.77) 0.04 (0.35) 0.02 (0.16) -0.02 (-0.09) -0.09 (-0.29)
Finland 0.05 (0.59) 0.05 (0.38) -0.02 (-0.12) -0.07 (-0.32) -0.30 (-1.18)
France -0.02 (-0.27) -0.06 (-0.58) -0.11 (-0.78) -0.14 (-0.82) -0.17 (-0.63)
Germany -0.01 (-0.18) -0.06 (-0.60) -0.10 (-0.81) -0.18 (-1.12) -0.26 (-0.92)
Greece -0.82 (-1.54) -0.76 (-1.03) 0.08 (0.16) -0.90 (-1.43) -0.26 (-0.25)
Hungary 0.12 (1.06) 0.14 (0.76) 0.01 (0.05) 0.18 (0.52) 0.22 (0.51)
Ireland -0.14 (-0.95) -0.23 (-1.11) 0.00 (-0.02) -0.30 (-1.02) -0.23 (-0.66)
Italy 0.06 (0.63) 0.06 (0.44) 0.08 (0.41) 0.03 (0.11) 0.09 (0.29)
Japan -0.04 (-1.02) -0.07 (-1.00) -0.12 (-1.15) -0.11 (-0.72) -0.04 (-0.15)
the Netherlands -0.03 (-0.54) -0.07 (-0.81) -0.12 (-0.95) -0.17 (-1.08) -0.24 (-0.89)
New Zealand -0.05 (-0.68) -0.12 (-0.94) -0.01 (-0.05) -0.25 (-1.17) -0.24 (-1.09)
Norway 0.00 (0.02) 0.06 (0.53) 0.20 (0.90) 0.07 (0.33) 0.69** (2.10)
Poland 0.02 (0.30) 0.10 (0.72) 0.01 (0.08) 0.30 (1.13) -0.16 (-0.46)
Portugal 0.06 (0.41) -0.03 (-0.11) 0.10 (0.29) 0.10 (0.28) 0.42 (0.83)
South Africa -0.05 (-0.44) -0.03 (-0.17) -0.20 (-0.79) 0.06 (0.20) -0.15 (-0.34)
Spain 0.08 (0.83) 0.06 (0.40) -0.09 (-0.55) 0.09 (0.35) 0.11 (0.36)
Sweden 0.03 (0.39) 0.03 (0.22) 0.00 (0.03) -0.02 (-0.10) -0.05 (-0.14)
Switzerland -0.05 (-0.78) -0.12 (-1.30) -0.13 (-1.09) -0.19 (-1.29) -0.21 (-0.86)
UK -0.04 (-0.63) -0.13 (-1.31) -0.14 (-0.99) -0.26 (-1.59) -0.48* (-1.92)
USA -0.13** (-2.16) -0.33*** (-2.78) -0.46*** (-2.91) -0.58*** (-2.82) -0.83*** (-2.60)

Note. Table reports the results of the examination of the January effect in international government bond returns.
The columns' headlines indicate maturities of bonds within given buckets expressed in years (Y): 1-3, 3-5, 5-7, 7-
10, and over 10 years. βiMAY is the regression coefficient from the equation (2) and t-stat is the corresponding
Newey-West (1987) adjusted t-statistics. Asterisks *, **, and *** indicate values significantly different from zero
at the 10%, 5%, and 1% level, respectively.

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SEASONALITY IN GOVERNMENT BOND RETURNS

Interestingly, we identified notable exceptions: Canada and the United States. In the two

North American Countries the bond markets significantly underperformed within the periods

from November to April. The negative returns were generally higher in absolute terms for long-

term bonds than for short term bonds and ranged from -0.12% (1Y-3Y) to -0.53% (10Y+) in

Canada, and from -0.13% (1Y-3Y) to -0.53% (10Y+) in the United States. The returns in

Australia proved also negative in four out of five maturity baskets ranging from -0.21% to -

0.47%. In the three countries, the outcomes were consistent with the implications of the

"parking-the-proceeds" hypothesis' implications for the "sell-in-May" anomaly. Still, these are

only 3 out of 25 markets; in the overhelming majority of the examined markets we detected no

reliable and consistent pattern of underperformance. Thus, the empirical data fail to support the

"parking-the-proceeds" hypothesis.

Table 5. Summary Statistics for the Seasonal Effects in Government Bond Returns

1Y–3Y 3Y–5Y 5Y–7Y 7Y–10Y 10Y+ All

Panel A: the January effect
Mean βiJAN 0.02 0.08 0.19 0.19 0.19 0.13
Mean t-stat 0.73 0.71 0.67 0.62 0.43 0.63
BT 57.38 72.81 87.84 80.29 69.21 78.16
Panel B: the "Sell-in-May" effect
Mean βiMAY -0.04 -0.08 -0.07 -0.14 -0.14 -0.09
Mean t-stat -0.29 -0.50 -0.52 -0.66 -0.52 -0.50
BT 15.32 20.58 29.74 23.74 32.87 26.89

The table reports summary results of the examinations of the January effect (panel A) and "sell-in-May" effect
(panel B) in international government bond returns. The columns' headlines indicate maturities of the bonds within
given buckets expressed in years (Y): 1-3, 3-5, 5-7, 7-10, and over 10 years. All is a pooled sample of all of the
maturity buckets. Mean βiJAN and Mean βiMAY are mean regression coefficients from equations (1) and (2) averaged
across the 25 examined countries, and mean t-stat are means of corresponding Newey-West (1987) adjusted t-
statistics. BT are p-values from the bootstrap test for the multinational samples as described in the Methods section;
BT are expressed as percentages.

Table 5 synthesises the outcomes of Tables 3 and 4. The results of aggregate tests

confirm the initial impressions from individual countries: the empirical data fail to confirm any

regularities in government bonds. The mean βiJAN across all of the examined countries proved

positive and the BT tests' hypotheses were not rejected. Furthermore, while the average βiMAY

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SEASONALITY IN GOVERNMENT BOND RETURNS

coefficients were negative, still all the BT tests identified no seasonal patterns within the

November-April period. To sum up, our examinations within the countries proved no

significant seasonal return pattern related to either the January effect or the "sell-in-May" effect.

Having examined the seasonal patterns in raw returns on government bonds, we

continued with the investigations of the analogous phenomena in the returns on factor

portfolios. Table 6 presents the results of the examination of the January effect in the returns

on government bond strategies. Clearly, this seasonality plays an insignificant role in the

government bond factor premia. Nearly all βiJAN regression coefficients were insignificant

within all of four categories of return patterns tested: volatility, credit risk, value, and

momentum. Only a handful of individual coefficients proved significant, for example positive

coefficients in the yield-to-maturity (12) and term premium (13) patterns when using the

quartile or quintile value-weighted portfolios.. Even in these exceptional cases, however, the

seasonal pattern failed to surface under other weighting schemes. Summing up, the January

seasonality exerts no influence on the performance of the volatility, credit risk, value, and

momentum factor premia in government bond markets.

Finally, Table 7 presents results analogous to Table 6 but considering the "sell-in-May-

and-go-away" seasonality. Again, we identified no evident seasonal pattern in the November-

April period. Indeed, we saw a few significant negative coefficients among some of the value-

weighted portfolios: beta, duration-times-yield, and 6-month moving average, but none proved

reliable and consistent across many specifications. Summing up, also the "sell-in-May"

anomaly appears to exert no influence on the performance of government bond factor premia.

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SEASONALITY IN GOVERNMENT BOND RETURNS

Table 6. The January Effect in Government Bond Factor Premia

Equal-weighted portfolios Value-weighted portfolios

No. Sorting variable Tertiles Quartiles Quintiles Tertiles Quartiles Quintiles
βiJAN t-stat βiJAN t-stat βiJAN t-stat βiJAN t-stat βiJAN t-stat βiJAN t-stat
Volatility
1 Adjusted duration 0.13 (0.37) 0.16 (0.40) 0.15 (0.34) 0.08 (0.21) 0.07 (0.19) 0.06 (0.16)
2 Beta 0.08 (0.20) 0.10 (0.20) 0.10 (0.18) 0.20 (0.42) 0.23 (0.43) 0.20 (0.36)
3 Idiosyncratic volatility 0.01 (0.03) -0.10 (-0.25) -0.09 (-0.21) 0.25 (0.44) 0.21 (0.34) 0.19 (0.27)
4 Standard deviation 0.09 (0.31) 0.02 (0.05) 0.04 (0.12) 0.22 (0.46) 0.22 (0.42) 0.23 (0.39)
5 Value at risk 0.00 (0.01) 0.00 (0.01) 0.01 (0.03) 0.22 (0.45) 0.16 (0.29) 0.13 (0.23)
6 Downside deviation 0.04 (0.14) 0.02 (0.06) 0.00 (0.01) 0.26 (0.54) 0.27 (0.52) 0.26 (0.44)
7 Duration-time-yield 0.14 (0.52) 0.13 (0.41) 0.16 (0.44) 0.18 (0.41) 0.28 (0.51) 0.31 (0.53)
Credit risk
8 Budget deficit & net debt -0.03 (-0.15) -0.07 (-0.28) -0.04 (-0.14) 0.05 (0.32) -0.05 (-0.26) 0.10 (0.53)
9 EIU sovereign risk -0.07 (-0.27) -0.22 (-0.71) -0.32 (-0.91) 0.05 (0.18) 0.12 (0.43) 0.00 (0.01)
10 Credit rating -0.13 (-0.56) -0.14 (-0.57) -0.12 (-0.43) 0.19 (0.67) 0.38 (1.43) 0.17 (0.52)
11 Market value -0.21 (-1.64) -0.22 (-1.41) -0.20 (-1.17) -0.14 (-1.36) -0.14 (-1.08) -0.14 (-1.01)
Value
12 Yield-to-maturity 0.15 (0.77) 0.14 (0.63) 0.14 (0.56) 0.58 (1.56) 0.89** (2.09) 0.73* (1.70)
13 Term premium 0.31 (1.35) 0.33 (1.38) 0.30 (1.09) 0.42 (0.96) 0.77* (1.66) 0.88* (1.67)
14 Term relative value 0.04 (0.25) 0.08 (0.35) 0.07 (0.30) 0.26 (0.87) 0.31 (0.96) 0.49 (1.36)
15 Credit relative value 0.16 (0.64) 0.23 (0.81) 0.20 (0.66) 0.16 (0.40) 0.33 (0.69) 0.24 (0.46)
16 Term & credit relative value 0.00 (0.01) 0.13 (0.68) 0.12 (0.53) 0.13 (0.44) 0.21 (0.62) 0.18 (0.53)
17 48-month yield change 0.43 (1.64) 0.48* (1.65) 0.52 (1.52) 0.15 (0.54) 0.26 (0.87) 0.38 (1.17)
Momentum
18 6-month price momentum 0.35 (1.44) 0.37 (1.20) 0.42 (1.21) 0.25 (0.70) 0.39 (0.83) 0.36 (0.72)
19 12-month price momentum 0.22 (0.91) 0.29 (0.97) 0.37 (1.10) -0.14 (-0.36) -0.18 (-0.44) -0.17 (-0.39)
20 6-month yield momentum 0.10 (0.40) 0.19 (0.69) 0.17 (0.57) 0.20 (0.73) 0.31 (1.02) 0.28 (0.90)
21 12-month yield momentum -0.02 (-0.06) 0.06 (0.21) 0.10 (0.34) -0.38 (-1.60) -0.26 (-1.01) -0.45 (-1.57)
22 6-month moving average 0.08 (0.29) 0.15 (0.44) 0.16 (0.40) 0.02 (0.06) -0.03 (-0.09) -0.17 (-0.38)
23 12-month moving average 0.12 (0.45) 0.18 (0.53) 0.17 (0.42) -0.13 (-0.38) -0.01 (-0.01) -0.21 (-0.43)
Note. Table reports the results of the examination of the "January" effect in government bond factor premia. The regression coefficients were estimated on returns on the 23 various
zero-investment factor portfolios that were long (short) in the quintiles, quartiles, or tertiles of bond buckets of the highest (lowest) factor variables as described in the Methods section.
βiJAN is the regression coefficient from the equation (1) and t-stat is the corresponding Newey-West (1987) adjusted t-statistics. Asterisks *, **, and *** indicate values significantly
different from zero at the 10%, 5%, and 1% level, respectively.

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SEASONALITY IN GOVERNMENT BOND RETURNS

Table 7. The "Sell-in-May" Effect in Government Bond Factor Premia

Equal-weighted portfolios Value-weighted portfolios

No. Sorting variable Tertiles Quartiles Quintiles Tertiles Quartiles Quintiles
βiMAY t-stat βiMAY t-stat βiMAY t-stat βiMAY t-stat βiMAY t-stat βiMAY t-stat
Volatility
1 Adjusted duration -0.12 (-0.74) -0.14 (-0.75) -0.16 (-0.78) -0.20 (-1.21) -0.23 (-1.23) -0.28 (-1.49)
2 Beta -0.23 (-1.29) -0.23 (-1.10) -0.26 (-1.13) -0.35* (-1.77) -0.38* (-1.70) -0.44* (-1.88)
3 Idiosyncratic volatility -0.15 (-0.83) -0.20 (-0.92) -0.18 (-0.72) -0.22 (-0.93) -0.38 (-1.36) -0.33 (-1.13)
4 Standard deviation -0.15 (-0.91) -0.19 (-1.00) -0.18 (-0.82) -0.27 (-1.25) -0.42* (-1.68) -0.37 (-1.38)
5 Value at risk -0.15 (-0.86) -0.15 (-0.81) -0.14 (-0.67) -0.33 (-1.52) -0.38 (-1.57) -0.36 (-1.38)
6 Downside deviation -0.14 (-0.82) -0.15 (-0.78) -0.12 (-0.56) -0.28 (-1.28) -0.36 (-1.49) -0.34 (-1.33)
7 Duration-time-yield -0.08 (-0.55) -0.12 (-0.70) -0.12 (-0.65) -0.31 (-1.56) -0.42* (-1.85) -0.41* (-1.70)
Credit risk
8 Budget deficit & net debt -0.01 (-0.10) -0.07 (-0.68) -0.11 (-0.89) 0.11 (1.23) 0.05 (0.53) 0.04 (0.37)
9 EIU sovereign risk 0.04 (0.24) 0.07 (0.36) 0.09 (0.44) 0.01 (0.06) 0.17 (0.93) 0.14 (0.61)
10 Credit rating 0.09 (0.73) 0.10 (0.66) 0.11 (0.59) 0.26* (1.88) 0.20 (1.24) 0.14 (0.73)
11 Market value 0.06 (0.67) 0.05 (0.61) 0.12 (1.21) 0.03 (0.36) 0.03 (0.32) 0.09 (1.06)
Value
12 Yield-to-maturity 0.00 (0.04) 0.04 (0.26) 0.04 (0.24) -0.16 (-0.85) -0.16 (-0.86) -0.20 (-0.93)
13 Term premium -0.11 (-0.91) -0.08 (-0.53) -0.04 (-0.22) -0.31 (-1.53) -0.24 (-1.07) -0.20 (-0.93)
14 Term relative value -0.07 (-0.61) -0.07 (-0.44) -0.05 (-0.28) -0.24 (-1.53) -0.25 (-1.40) -0.27 (-1.42)
15 Credit relative value -0.21 (-1.48) -0.24 (-1.42) -0.26 (-1.37) -0.38* (-1.75) -0.37 (-1.48) -0.40 (-1.44)
16 Term & credit relative value -0.18 (-1.47) -0.16 (-1.16) -0.16 (-0.97) -0.27 (-1.43) -0.25 (-1.24) -0.28 (-1.25)
17 48-month yield change -0.08 (-0.70) -0.05 (-0.35) -0.07 (-0.40) -0.16 (-1.60) -0.16 (-1.34) -0.21 (-1.63)
Momentum
18 6-month price momentum -0.09 (-0.61) -0.09 (-0.53) -0.09 (-0.53) -0.08 (-0.46) -0.07 (-0.33) -0.05 (-0.24)
19 12-month price momentum 0.00 (0.04) 0.05 (0.29) 0.06 (0.35) -0.26* (-1.72) -0.21 (-1.21) -0.19 (-1.00)
20 6-month yield momentum 0.01 (0.06) 0.05 (0.37) 0.06 (0.39) -0.05 (-0.31) 0.06 (0.32) 0.03 (0.15)
21 12-month yield momentum 0.17 (1.59) 0.18 (1.41) 0.20 (1.37) -0.02 (-0.13) -0.01 (-0.05) 0.00 (0.00)
22 6-month moving average -0.22* (-1.65) -0.21 (-1.36) -0.23 (-1.29) -0.28 (-1.62) -0.33* (-1.75) -0.36* (-1.83)
23 12-month moving average -0.12 (-0.79) -0.11 (-0.61) -0.09 (-0.45) -0.25 (-1.27) -0.31 (-1.44) -0.33 (-1.46)
Note. Table reports the results of the examination of the "sell-in-May" effect in government bond factor premia. The regression coefficients were estimated on returns on the 23 various
zero-investment factor portfolios that were long (short) in the quintiles, quartiles, or tertiles of bond buckets of the highest (lowest) factor variables as described in the methods section.
βiMAY is the regression coefficient from the equation (2) and t-stat is the corresponding Newey-West (1987) adjusted t-statistics. Asterisks *, **, and *** indicate values significantly
different from zero at the 10%, 5%, and 1% level, respectively.

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SEASONALITY IN GOVERNMENT BOND RETURNS

Concluding Remarks

The study aimed to investigate the January and "sell-in-May" seasonal patterns in government

bond returns and factor premia. The comprehensive examination conducted within 25 country bond

markets for years 1992-2016 proved these return patterns play an insignificant role in government

bond returns. The test results proved the effects appear only in a handful of individual countries and

fail to surface in an aggregated sample. Also, neither the January nor "sell-in-May" effects was

reflected in the performance of the factor premia and the volatility, credit risk, value, and momentum

strategies proved unaffected by these seasonal patterns.

The results have implications for both academic and practitioners' purposes. Our outcomes

contradict the "parking-the-proceeds" hypothesis by Ritter (1988). The "sell-in-May" effect is

nonexistent in government bonds, and the January effect seems to be merely a statistical artefact. The

seasonal anomalies should neither be regarded in designing asset pricing factors for government bond

markets nor constitute the basis for market timing strategies designed for international government

bonds. The results support, however, the efficient market hypothesis postulated by Fama (1970) on

the bond market in the majority of the analysed countries. As such they reinforce the rationale for

using traditional neoclassical finance tools, at least when considering seasonal anomalies.

Further studies in could be pursued in two major directions. First, by extending the research

sample to some related asset classes, like municipal bonds and second by broadening the catalogue

of the tested seasonal anomalies to some short-term effects, like turn-of-the-month, days of the week,

or holidays anomalies.4

4
See, e.g., Ziemba (2012) or Patell and Sewell (2015) for review.

Electronic copy available at: https://ssrn.com/abstract=2832086

SEASONALITY IN GOVERNMENT BOND RETURNS

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