Abstract
In volatile markets -like the calendar market anomalies- institutions, traders and speculators constantly search for predictable security’s price action patterns; and their trading plans disturb security prices when they attempt to exploit the uprising trading opportunities. Generic forecasting patterns once become known to public are, therefore, unlikely to win for long periods of time and they will self-destruct when discovered by a large number of traders and speculators. Therefore, this gives rise to non-stationarities in the time series of financial returns and complicates formal tests and evidences of market efficiency, market anomalies and the search for successful and profitable forecasting approaches. Obviously, the need for adapted (i.e. no generic) strategies in trading the calendar market anomalies is apparent. This personalization is complicated and is referred to particular calendar market anomaly (seasonality), to trading instrument characteristics (e.g. beta functionality), and to the traders’ profile (investors, swing traders, intraday speculators, etc.). Hence, in the calendar market anomalies domain, the personalized (adaptive) temporal dynamic approaches could improve trading returns by incorporating temporal trading functionalities. The main target of this paper is to investigate, analyze and document the personalized trading functionalities enclosed in calendar market anomalies. These functionalities are characterized as temporal because of the “time” function involved by default in calendar market anomalies. In particular this article is focused on the identification of monthly calendar anomalies on the Greek and Bulgarian stock markets. Empirical evidences, before and after the 2007 and 2009 financial crises, are presented in support of the hypothesis that small and less liquid markets tend to exhibit market anomalies. In the case of Greece these anomalies are so strong that they are not influenced by the recent crises. Empirical evidences also show that crises may change the long-run calendar anomalies trading functionalities and therefore lead to an improved Market efficiency as a short-run effect. Paper’s innovation is related to the introduction and discussion of the personalized (adapted) temporal trading functionalities encapsulated in markets inefficiency, as far as the calendar markets anomalies is concern. Actually, the presented analysis, in this article, enhances the existing portfolio of approaches and knowledge about the impact of financial crises on real firm behavior during the calendar market anomalies periods.
Highlights
A market anomaly is a price and/or rate of return distortion on a financial market that seems to contradict the efficient-market hypothesis [1,2,3]
Personalized temporal trading functionalities involved in calendar market anomalies and affects markets inefficiency as far as the various “effects” is concern. These “effects” are well known to traders and speculators, so stable forecasting patterns are, unlikely to persist for long periods of time and have been already self-destructed because they have been “discovered” by a large number of traders and speculators
Stable forecasting patterns are, unlikely to persist for long periods of time and will self-destruct when discovered by a large number of traders and speculators
Summary
A market anomaly (or market inefficiency) is a price and/or rate of return distortion on a financial market that seems to contradict the efficient-market hypothesis [1,2,3]. According to the so called efficient-market hypothesis, regulated security markets are viewed as efficient1 [1,2,3,7] and there is a logical justification in that respect. These markets have competitive structure, their transaction costs are minimal, their infrastructure is well organized and the information is usually accessible to all market agents. In light of these circumstances, it seems only logical to expect that these markets should be efficient
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