The April Effect: No Aprils Fool: Four decades of peak return on Oslo Stock Exchange

Abstract

In this paper, I examine and quantify the “April Effect” at Oslo Stock Exchange over the period 1980 to 2023. This has been done by employing OLS with Aprils return as the constant and split into first and second half of sample. Following, I create an ‘April Return Premium’ for each decade with three Fama-French factors. The April effect is strongest at the beginning and diminishes slightly throughout the period analysed. Moreover, a calculation of Sharpe ratios per month shows that April stands out with highest risk-adjusted return for the VW index. Finally, I examine how weather with the Seasonal Affective Disorder affect returns. To assess the impact of SAD, a method reliant on sunlight variation is employed, the Onset Recovery variable. Founded on this model, I developed an OR-variable based on data for the Norwegian weather. The results show that seasonal affective disorder significantly influences returns on Oslo Stock Exchange but does not explain the April effect which remains significant. These findings suggest the possibility of a “free lunch” in the market. Alternatively, it could be an effect that is in the eye of the beholder.