Testing for Seasonal Affective Disorder on Selected CEE and SEE Stock Markets

Abstract

Effects of seasonal affective disorder (SAD) are explored on several selected Central and South East European markets in this study for the period 2010–2018. Both return and risk sensitivities on the SAD effect are examined for 11 markets in total (Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Poland, Serbia, Slovakia, Slovenia, Romania and Ukraine). SAD effects are based upon psychiatric and behavioural theories, and are rarely observed on the stock markets today. Thus, this research provides empirical evaluation of the mentioned effects for some of the markets for the first time in the literature. The results indicate that 6 out of 11 markets exhibit SAD effects to some extent, meaning that investors’ risk aversion does change over the year, depending upon the season of the year. Such results have consequences in finance theory modelling and practical usage in investment strategies on stock markets as well.