Is There a January Effect in Corporate Bond and Paper Returns?

Abstract

Abstract This paper examines the question of seasonality in corporate bond and commercial paper returns by testing specifically for a January effect. Complete data covering a 131‐year period for both series, as well as term premiums, are analyzed using a procedure that provides consistent estimates of the variance‐covariance matrix. The results suggest that a January effect does exist for both assets for the entire period; however, closer examination reveals a strong January effect for the pre‐1915 period but a dampening thereafter. We conclude that precise results depend primarily upon the time period chosen and the debt instrument examined. Tests involving the inflation rate strengthen the case for a January seasonal.

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