Calendar cycles, infrequent decisions, and the cross section of stock returns

We show that when investors review their consumption and investment plans infrequently at different points in time with interim information flows, the standard consumption-based capital asset pricing model (CCAPM) will continue to hold only at those points in time when all investors review their plans. Stylized facts suggest that the end of the tax year is a candidate for one such points in time. Therefore, we should expect more support for the CCAPM during the period surrounding the end of the tax year, i.e., the fourth and first quarters in Japan where the tax year ends in December, and the first and second quarters in the United Kingdom where the tax year ends in April. Our empirical findings are consistent with these expectations.