Monthly seasonality in U.S. long term corporate bonds
We explore monthly seasonality in high grade long term corporate bonds from January 1926 to December 2008. We test three types of month effects. In addition, we analyze the data based on Republican and Democratic presidencies. The mean of monthly total returns for the entire data set (0.50%) is significantly greater than zero. The mean return of January is significantly higher than the mean of the other eleven months stacked together; the mean of March is significantly lower. We find significantly higher or lower volatilities for some months compared to the other months. January experienced the highest mean monthly return, followed by a dip in February and March, and then an upward trend until January. The mean of monthly returns during the Republican presidencies (0.66%) is significantly higher than during the Democratic presidencies (0.33%). Though not fully efficient the U.S. corporate bond market exhibits a high degree of efficiency.
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