Investor Sentiment Bias and the Persistence of the Spring Festival Anomaly in China’s A-Share Market: A Behavioral Finance Perspective

Abstract

The Spring Festival anomaly, characterized by significantly higher stock returns around the Chinese Lunar New Year, has persisted for over 30 years in China's A-share market, directly challenging the core proposition of the Efficient Market Hypothesis. Classical finance theory fails to explain why this seasonal pricing deviation remains stable despite the rapid development of institutional trading and algorithmic trading. This paper adopts a systematic literature review method based on investor sentiment theory and limits of arbitrage theory to analyze the formation mechanism and persistence logic of the Spring Festival anomaly. The research identifies three cultural-psychological drivers of positive investor sentiment bias during the Spring Festival period: the year-end bonus effect, festive atmosphere effect, and lucky culture effect. Furthermore, it clarifies how three types of arbitrage constraints—fundamental risk caused by holiday market closure, noise trader risk resulting from retail investor dominance, and implementation costs including short-selling restrictions—jointly prevent rational arbitrageurs from eliminating abnormal returns. Finally, this paper constructs an integrated behavioral finance framework that explains both the formation and persistence of the Spring Festival anomaly, filling the research gap in the field of cultural behavioral finance. The findings provide empirical evidence and practical guidance for investors to formulate seasonal investment strategies and for regulators to improve market efficiency.