Calendar Anomalies Research Articles

Market efficiency and calendar anomalies in commodity futures markets: A review

This study reviews the literature on market efficiency and calendar anomalies in agricultural commodity futures markets in India and abroad. The study finds that most studies used ordinary least squares regression analysis to test for the weak form of market efficiency and only a few markets are found to be weakly efficient. Many studies that depict market inefficiency report the presence of calendar anomalies in metals and agricultural commodity futures. The most frequently observed calendar anomalies are the day-of-the-week effect and the month-of-the-year effect. Knowing about these market inefficiencies may help commodity market players formulate their purchase, sale, and trading strategies.

Stock returns and calendar anomalies on the London Stock Exchange in the dynamic perspective of the Adaptive Market Hypothesis: A study of FTSE100 & FTSE250 indices over a ten year period

This paper analyses the behaviour of stock returns and calendar anomalies over a ten year period: 2007Ƀ2016 on the London Stock Exchange, through two major indices, the FTSE100 and FTSE250. The efficiency of the indices and the presence of calendar anomalies are investigated with parametric and non-parametric tests. The two main indices of the UK stock market undergo changes from states of dependency of returns to independence of returns and vice versa, but their behaviour is not concomitant. This study finds that financial markets in the UK can undergo changes from states of inefficiency moving to efficiency and vice versa in support of the Adaptive Market Hypothesis. This study also captures the inconstant and time varying behaviour of calendar anomalies and their occurrence. This again supports the Adaptive Market Hypothesis. Overall, it enables investors to get a better understanding of the behaviour of stock returns and to devise profitable investment strategies according to market conditions.

Calendar Anomalies in the Banking and it Index: The Indian Experience

The present study seeks to inspect the calendar effects in major service sector indices in the Indian securities market. The Banking sector and Information technology sector are identified as the prominent service sectors in the Indian economy. BSE Information Technology Index and BSE Bankex are considered as a proxy for the Information Technology and Banking sector. Period of study is chosen from the year 2010 to 2019 to examine the impact of calendar anomalies post-recession. Daily index returns are considered during the period of study .GARCH family models and OLS regression techniques were utilized for the study. Empirical findings indicate the presence of the January effect and turn of the month effect on the index returns and volatility. The study also suggests the possibility of a weak form of efficiency for the IT sector. Significant volatility persistence is observed in both the indices. The study has benefits for regulators to understand the price movements of the service sector after the global recession and frame their policies accordingly. Investors will benefit from this study for effective portfolio management.

Static or Adaptive The month-of-the-year and Intra-month Effects in African Stock Markets

We investigated adaptive month-of-the-year (MOY) and intramonth/half-of-the-month (HOM) effects in African stock markets (ASMs) using the daily returns of All Share Indexes in Nigerian stock exchange, Johannesburg Stock Exchange, stock exchange of Mauritius, Casablancan stock exchange and Tunisian stock exchange from 1998:1 to 2018:2. This study employed rolling GARCH models for the purpose of estimations. Our results reveal that the behaviour of MOY and HOM effects are cyclical rather than being persistent. Hence, we proved that the behaviour of MOY and HOM calendar anomalies in ASMs is adaptive as opposed to being static, which is consistent with the adaptive market hypothesis (AMH) as opposed to efficient market hypothesis. Thus, local and international investors should not view ASMs as anomalous in absolute form.

Introducere în analiza anomaliilor calendaristice, Partea a doua (An Introduction to the Analysis of the Calendar Anomalies, Part 2)

This paper approaches some simple methods for the calendar anomalies identification. Taking the TOY Effect as an example, we show how the t tests or the OLS regressions could be used to detect a seasonal component of the financial assets’ returns.

Islamic Calendar Anomaly and Market Return Behavior: Empirical Evidence from Eight Islamic Economies

Islamic Calendar Anomaly and Market Return Behavior: Empirical Evidence from Eight Islamic Economies

Practical Applications of The Size Effect Is Alive and Well, and Hiding Behind Calendar Anomalies

<h3>Practical Applications Summary</h3> In <b><i>The Size Effect Is Alive and Well, and Hiding Behind Calendar Anomalies</i></b>, in the September 2019 issue of <b><i>The Journal of Portfolio Management</i></b>, <b>David YechiamAharon</b> (<b>Ono Academic College</b>) and <b>Mahmoud Qadan</b> (<b>University of Haifa</b>) investigate the size-effect asset-pricing anomaly and its possible recurrence during different calendar periods. Using nearly 90 years of monthly, weekly, and daily data to test for the tenacity of the size effect’s small-cap premium, the authors assess whether and to what degree this pricing anomaly occurs within familiar calendar-based anomalies. Recent research has cast doubt on the presence of the size effect. One such critique holds that, according to the efficient market hypothesis, pricing anomalies cannot persist because investors would invariably exploit them, and the anomalies would disappear. In this article, the authors present conflicting evidence, showing that although the size effect does somewhat diminish over time, it still persists—and even thrives in some cases—within well-known calendar anomalies. Even when controlling for such variables as return type (value-weighted versus equal-weighted), sample periods, and regression-estimation type, the authors observe a frequently robust size effect across multiple seasonal anomalies—a finding notably consequential to investment decisions. <b>TOPIC:</b>Factor-based models

Calendar Anomalies, Market Regimes, and the Adaptive Market Hypothesis in African Stock Markets

Purpose: This paper examines the changing behavior of two calendar anomalies in African stock returns – the month-of-the-year and the intra-month effects – and their implications for the adaptive market hypothesis (AMH). Methodology: We applied two-stage Markov switching models (MSMs) instead of the conventional single state regression model. The sample period includes the daily index return of Nigerian, South African, Mauritian, Moroccan, and Tunisian stock exchanges from January 1998 to February 2018. Findings: We found that (i) all the markets except for the Johannesburg Stock Exchange (JSE) have a higher tendency to be in bearish state than bullish state, (ii) month-of-the-year and intra-month effects appear in one regime and disappear in another regime, and (iii) the behavior of calendar anomalies is affected by market conditions and conforms to AMH rather than the efficient market hypothesis (EMH). Practical Implications: We present that (i) calendar anomaly is a characteristic that changes under different regimes or market conditions in African stock markets, (ii) active investment management may yield profits for market participants, depending on the market conditions and the anomaly in question, and (iii) the right approach would be for investors to consider each market with its own peculiarity even when they are in the same continent. Originality/Value: The sensitivity of the month-of-the-year and the intra-month effects to market conditions has not been documented in African stock markets, especially with the use of regime-switching models

Islamic Calendar Anomalies Reshaping Investor Behavior: A Qualitative Study

The objective of this study is to explore how investors execute decisions in persistence of Islamic anomalies in context of Pakistan stock exchange. Applying interpretive approach, data was acquired from PSX investor by asking a series of questions through an interview protocol. Interviews were conducted by using semi-structured interview approach. The responses were explored using NVivo 10.0 plus software. The results of the study indicated Islamic anomalies are changing emotions and perceptions of investors due to their past experience and perceived market consequences, and biased behaviors. Due to Islamic anomalies investors decisions are found to be biased and depict a self-serving, anchoring and overconfident behavior. Moreover, various conventional market factors (e.g. market capitalization, price earning and capita market line fluctuation etc.) are constant and reshaping investor decisions. Promotion of corporate culture, controlling mispricing, conducting awareness/ training sessions on rationality, capital gain than price gain is seriously required in local context. This is the first qualitative study investigating Islamic Calendar anomalies and PSX investors, leading to the formulation of sound policy implications.

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

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.

The Extended Friday the 13th Effect in the London Stock Exchange

The extended Friday the 13th Effect is a calendar anomaly consisting in abnormal stock returns that occur in a time interval that starts some trading days before the supposed unlucky day of Friday the 13th and it ends some trading days after. This paper approaches the presence of such patterns in the evolution of the closed values of five indexes from the London Stock Exchange: FTSE 100, FTSE 250, FTSE 350, FTSE SmallCap and FTSE All-Share. This investigation is performed for two periods: the first from January 1998 to December 2006 and the second from January 2007 to July 2019. While the first one could be considered as relative quiet, the second one was more turbulent. In the case of first period the results revealed, for four indexes, that in the trading day that follows Friday the 13th the returns were significant higher than the average. Instead, in the case of second period, we found, for the same four indexes, that two trading days before the Friday the 13th the returns were significant lower than the average. We conclude that, like many other calendar anomalies, extended Friday the 13th Effect is not persistent in time.

Islamic Calendar Anomaly and Market Return Behavior: Empirical Evidence from Eight Islamic Economies

This study is aimed to explore the Islamic calendar anomaly or lunar effect over the period of eleven years commencing from Zilhajj 1429 (January 2007) to Muharram 1440 (September 2018) on daily historical returns. This study has identified the essence of weak-form Efficient Market Hypothesis Fama (1965) in Pakistan, Turkey, Malaysia, Bangladesh, Iran, Egypt, Saudi Arabia, and Dubai. Moreover market return behavior and seasonal effects are identified by using the dummy regression model. It is identified that anomalous behavior is reality in long run aptitude in all Islamic economies and the average behavior is reflecting that markets have been inspired by the seasonal effects. Overall the market behavior reflects weak form of efficiency except Iran and Bangladesh. It is identified that the Gregorian Calander is static but the lunar calendar is dynamic and go across all the weathers. Weathers and temperatures may affect perception and psychology of investor.

Changes in the Behavior of Stocks Returns during the Turn-of-the-Quarter

Some calendar anomalies are not persistent in time. They experience various changes, including the modifications on their specific time intervals. This paper approaches the persistence in time of the abnormal returns of stock returns from United States capital market during the turn-of-the-quarter interval. We employed the data from three major indexes (Standard & Poor's 500, Dow Jones Industrial Average and NASDAQ Composite) during two periods: a relative quiet period from January 1990 to December 2006 and a more turbulent period from January 2007 to July 2019. For the first period we found, for two of the three indexes, that, comparing with the average, the returns from the last trading day of a quarter were significant lower, while the returns from the first trading day of a quarter were significant higher. In the case of second period the results indicate that, for all three indexes, comparing with the average, the returns from the last fifth and fourth trading day of a quarter were significant lower, while the returns from the first trading day of a quarter were significant higher.

The Turn of the Month Effect on CEE Stock Markets

The Turn of the month effect is one of the better-known calendar anomalies. If a stock market is affected by the Turn of the month effect, it records significantly higher returns during a relatively short time period around the end of the old month and the beginning of the new one, than during the remainder of the month. This paper investigates the presence of the Turn of the month effect in the stock markets of 11 Central and Eastern European (CEE) countries. We focused not only on the anomaly in returns, but also on the anomaly in price volatility. The results show that, during a 20-year period (1999–2018), a statistically significant Turn of the month effect was present in the stock markets of seven out of 11 investigated countries. However, the anomaly affected only the stock market returns, not price volatility.

The Extended Friday the 13th Effect in the US Stock Returns

The classical Friday the 13th Effect refers to a calendar anomaly of financial markets which is generated by the fear of bad luck shared by the superstitious investors. As a result of their behavior, the returns from the supposed unlucky day of Friday the 13th are significant lower than those from the other Fridays. The superstition could also affect the returns from the trading days there are adjacent to Friday the 13th. In order to avoid the bad luck, some investors sell their stocks a trading day before and their transactions lead to a fall of the prices. Those who are reluctant to buy stocks on Friday the 13th delay such transactions to the next trading day causing prices to rise. In time, the knowledge about this pattern could induce significant changes in investors’ behavior, even to those that are not superstitious. Once become aware that one trading day before Friday the 13th the stock prices are usually low, many investors would prefer to sell two or three trading days before. There also were investors that would buy stocks not one trading day after Friday the 13th, when the prices are expected to be high, but two or three trading days after. Other investors could exploit the opportunities to buy cheap on Friday the 13th or one trading day before or to sell high one trading day after and their transactions could attenuate the abnormal returns from these days. In such ways the classical form of Friday the 13th Effect could be replaced by an extended form which consists in abnormal returns for a specific time interval that starts some trading days before the supposed unlucky day and ends some trading days after. This paper explores the behavior of the stock returns of 42 companies, from seven sectors of the United States economy, in the period January 2010 – March 2019, for a time interval that starts three trading days before Friday the 13th and ends three trading days after. The results indicate, for many of them, significant low returns in some trading days before Friday the 13th and/or significant high returns some trading days after. We also found some particularities of the extended Friday the 13th Effect among the seven sectors.

REVISITING CALENDAR ANOMALIES IN BRICS COUNTRIES

We use a GARCH-dummy approach to analyze the influence of calendar anomalies on conditional daily returns and risk for BRICS countries’ stock markets during 1996 to 2018. The month-of-the-year (MOY), turn-of-the-month (TOM), day-of-the-week (DOW), and holiday effects are investigated. The most striking DOW effect is given for Tuesdays. The TOM effect is validated, while we interestingly find no evidence of a January effect. A general holiday effect is not documented, but the Indian market shows a significant pre- and a post-holiday effect, the Chinese market is anomalous before public holidays and the South African market is affected after holidays only.

Stock Returns, weather, and air conditioning.

This study investigates the relationship between stock returns and local weather through a new channel—the influence of the air-cooling system installed in the New York Stock Exchange (NYSE). To our knowledge, we are the first to employ the use of air conditioning to examine whether and how weather, especially excessively high temperature, and other factors affect stock returns. Using data for 1885–1914, we show that lower Dow Jones Average (DJA) returns were significantly associated with hotness before the NYSE trading rooms were equipped with the cooling system in 1903, whereas this correlation is largely weakened afterward. We also find that before the introduction of the air-cooling system, the negative effect of high temperatures on stock returns was stronger when the precipitation was lower. We obtain consistent results when controlling for the calendar anomalies such as the May-to-October effect, the Monday effect, and the effect of macroeconomic conditions.

Analysis of the January Effect in Time Series of Mexican Stock Market Indexes

The current article has the research objective to search for empirical evidence of the January effect within the time series of the IPC and the sector indexes of the Mexican stock market using econometric GARCH analysis. The dataset is formed by the log returns of the daily closing prices corresponding to the IPC as well as the sector indexes covering the period from 01/01/2010 to 12/31/2018. The main results of the article are as follows: Based on the January effect the Efficient Market Hypothesis in its weak form sense cannot be rejected for the Mexican stock market as the results do not provide significant evidence of the existence of the respective calendar anomaly within the analyzed time series of the IPC and the different sector indexes.

Seasonal patterns and calendar anomalies in the commodity market for natural resources

This study investigates whether a wide range of 25 anomalies documented in the finance literature with regard to equities exist in nine natural resources that include precious metals and energy commodities (gold, silver, palladium, platinum, copper, zinc and energy-based resources: oil, heating oil, and natural gas). Using daily, weekly and monthly data for 1986 to 2018, we find evidence of the existence of many of these anomalies in the commodity market. The results, in many cases, are particularly significant after the earlier periods of the 2000s, during the financialization of commodities era when many international portfolio and hedge fund managers, as well as retail investors, increased their exposure to commodities. Our results are robust for different estimation procedures and subsamples.

The Size Effect Is Alive and Well, and Hiding behind Calendar Anomalies

Empirical evidence from the literature documents that the size effect has gradually diminished since the early 1980s. In this article, the authors examine the stability of this anomaly between 1926 and 2014. The evidence they document indicates a substantial presence of the size effect across various calendar anomalies. The anomalies considered are the January effect, the Halloween effect, the Mark Twain effect, the other January effect, the seasonal affective disorder effect, and the turn-of-the-month, day-of-the-week, and week-of-the-year effects. Their findings hold true for different sample periods, various modeling specifications, and types of returns and may provide investment professionals such as portfolio managers, investment officers, analysts, and other market participants with a practical tool for their daily decision-making. TOPICS:Factor-based models, factors, risk premia