End Of Trading Day Research Articles

Calendar anomalies: Case of Karachi Stock Exchange

Calendar anomalies can be defined as any irregularity or consistent pattern that cannot be defined by means of any accepted theory of finance. This study has been conducted to find out holiday effect and half month effect in Karachi Stock Exchange (KSE). Our data for this study has been obtained from KSE 100 index which is a capital weighted index and consists of 100 companies and represent about 86% of the total market capitalization of the Exchange. Index of all listed shares is calculated at the end of trading day at closing prices. Data pertaining to the daily stock index has been gathered for the period starting from November, 1991 to December, 2007. Daily logarithmic market returns are then calculated from this data for testing different calendar effects. Data was further divided into two parts based on change of working days in a week. Our results reveal that the returns in pre-holidays have been found significant than post-holidays. Also, the average returns in the first half of the month are significantly higher than the other half of the month. Thus, we can say that Karachi Stock Market is an inefficient market and has an anomalous behavior towards returns. Key words: Calendar anomalies, Karachi Stock Exchange (KSE), average returns.

Large price movements and short-lived changes in spreads, volume, and selling pressure

In this paper we examine changes in dollar and relative bid-ask spreads of stocks following large price movements. We investigate large increases and decreases separately and link our results to current market microstructure theories on trading activities and spreads. We also look at changes in volume and selling pressure to interpret the changes in trading activity. Our results show that the market reacts differently to price increases and decreases. For large price decreases, trading increases on the sell side even when spreads have increased. For large price increases, trading increases on the buy side during a period of higher spreads. However, the increases in dollar spreads and price pressure are most pronounced at the end of trading day. Our results are consistent with microstructure models that link trading activities and costs to the level of asymmetric information.