School Holidays and Stock Market Seasonality

Using school holiday data from 47 countries, the authors document a strong link between school holidays and market returns: stock market returns in the month after major school holiday are 0.6% to 1% lower than in other months. This explains—but is not limited to— the “September effect”: In the U.S., September is the only month that exhibits a negative average return over the past century. The post school-holiday effect remains even with monthly fixed effects. They explore the explanation that the effect is due to investor inattention during school holidays, which slows the incorporation of (negative) information in security prices.