We propose a flow-based explanation for two long-standing anomalies in empirical finance – Sell in May and the January effect. We find that mutual fund flows exhibit similar seasonal patterns as stock returns. After controlling for fund flows both calendar effects become insignificant. We...

This paper proposes a two-state Markov-switching model for stock market returns in which the state-dependent expected returns, their variance and associated regime-switching dynamics are allowed to respond to market information. More specifically, we apply this model to examine the explanatory...