The January barometer in emerging markets: new evidence from the Gulf Cooperation Council stock exchanges

Costas Siriopoulos,Layal Youssef

doi:10.21511/imfi.16(4).2019.06

Costas Siriopoulos, Layal Youssef

Open Access

https://doi.org/10.21511/imfi.16(4).2019.06

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Abstract

International investors’ interest in the capital markets in the region of Gulf countries has dramatically increased in last two decades. Thus, it would be motivating to investigate their characteristics, where the January anomaly is a major one. This paper studies the veracity of the January effect rule in the Gulf Cooperation Council (GCC) stock markets and examines the predictive power of January returns. Seven GCC stock markets are tested – the market indices in Bahrain, Abu Dhabi, Dubai, Kuwait, Oman, Qatar, and Saudi Arabia – from January 1, 2001 until December 31, 2018, a timeframe which has rarely been analyzed. Ordinary least square (OLS)-based dummy variable regression equation was used as the conventional econometric procedure in the works of financial calendar anomalies in stock markets. Some evidence is reported for the markets of Dubai and Kuwait. The paper also provides an additional explanation for the performance of stock market of Kuwait. The findings are opposite to the well documented evidence that emerging markets are less efficient and hence it is likely that several market anomalies are further pronounced. The results suggest that the predictive power of the January anomaly can be considered as a temporary anomaly in the GCC markets, since it is concentrated in only a couple of GCC markets and does not persist in time.

Highlights

There are many market anomalies distinguished and reported in the stock market literature
This paper studies the veracity of the January effect rule in the Gulf Cooperation Council (GCC) stock markets and examines the predictive power of January returns
The results suggest that the predictive power of the January anomaly can be considered as a temporary anomaly in the GCC markets, since it is concentrated in only a couple of GCC markets and does not persist in time

Summary

INTRODUCTION

There are many market anomalies distinguished and reported in the stock market literature. In a recent study, Patel (2012) of- tribution, only for the periods the effect is obfers the evidence from the US stock market that served (Mills et al, 2000) It might be small firms did not generate significantly higher the case that a calendar anomaly is the returns in January over the remaining months of effect of another’s calendar anomaly The paper anomaly is used in the literature under oth- provides evidence that for the stock exchanges er cases known as other January effects (Cooper, of Kuwait and Saudi Arabia, Halloween effect is Mcconnell, & Ovtchinnikov, 2006).

MODEL SPECIFICATIONS

Findings

CONCLUSION