The purpose of this paper is to test the so-called “Sell in May” effect in globally listed private equity markets based on monthly data covering the period 2004–2017.
Ordinary least squares regressions, generalized autoregressive conditional heteroscedasticity regressions and robust regressions are used to investigate the existence of the “Sell in May” effect in globally listed private equity markets. Additionally, the authors conduct robustness checks by dividing the sample period into two subperiods: pre-financial and post-financial crisis periods.
The authors find limited statistically significant evidence for the “Sell in May” effect. In particular, the authors observed a statistically significant “Sell in May” effect when taking time-varying volatility into account. These findings indicate that the “Sell in May” effect is driven by time-varying volatility. By contrast, economic significance as measured by visual return inspection and the magnitude of the estimated “Sell in May” coefficients in combination with their positive signs was found to be considerable.
The findings are important for all kinds of investors and asset managers who are considering investing in listed private equity.
The authors present a novel study that examines the “Sell in May” effect for globally listed private equity markets by using LPX indices, offering valuable insight into this growing asset class.
