Rd. Brooks et al., BETA STABILITY AND MONTHLY SEASONAL EFFECTS - EVIDENCE FROM THE AUSTRALIAN CAPITAL-MARKET, Applied economics letters, 4(9), 1997, pp. 563-566
A number of studies exist across a range of equity markets showing tha
t a significant proportion of stocks in those markets have betas that
vary over time. A research challenge posed by this body of evidence is
to identify the factors that explain this time variation in individua
l stock betas. There is also an extensive literature reporting the exi
stence of strong monthly seasonal patterns in equity returns from many
markets and across extraordinarily lengthy time periods. Accordingly,
using monthly Australian equity returns data, this paper investigates
whether seasonal regularities such as the January effect can provide
an explanation of beta variation. A key finding of this paper is that
taking account of the January monthly seasonal and other monthly seaso
nals has no effect on the beta stability characteristics of individual
stocks. Hence, based on our analysis, seasonal effects does not provi
de an explanation of beta instability. A subsiduary finding is that st
ocks with significant monthly seasonal effects tend to have a smaller
average market capitalization.