StudentShare solutions
Triangle menu

Calendar Anomalies: Definition and Background Information - Research Paper Example

Not dowloaded yet

Extract of sample
Calendar Anomalies: Definition and Background Information

454). Although it was only recently that substantial studies were devoted to look seriously and closely into this phenomenon, calendar anomalies have always been regarded as part of the market folklore. As early as the 1930s, a few studies had already broached the idea of seasonal effects (Jacobs & Levy, p. 135).
Recently, a spate of studies looked particularly into this phenomenon despite the admitted dominance of Professor Farma’s (1970) efficient market hypothesis (EMH hereafter), which is said to largely underpin stock market and securities returns rationale. The EMH is “A market in which prices always ‘fully reflect’ available information” (cited Scheurle, p. 19). Thus, while the information-reliant EMH makes stock markets largely unpredictable, calendar anomalies results in the opposite. Moreover, they breach the EMH principle that stock returns should be random and unpredictable because they allow market participants to anticipate potential rise and fall of the market and use that knowledge to make profits (Gao and Kling 2005, pp. 75-76)
In the United States, for example, the day-of-the week and January effects have been widely studied, as a consequence of which a large amount of evidence has been found that supports their validity (Lean et al, 2007, p. 2). The studies conducted by Rozeff and Kinney (1976), Gultekin and Gultekin (1983), Keim and Stambaugh (1984) and Kato and Shallheim (1985), among others, validated the observation that stock returns are higher on the month of January as compared to other months. On the other hand, the day-of-the-week effect suggests that stock returns between the close of Friday and that of Monday are comparatively lower than that of the other days of the week. These were the results of the studies conducted by the likes of Gibbons and Hess (1981), Mills and Coutts (1995) and Al-Loughani and Chapell (2001) (Alagidede and Panagiotidis 2006, p. 2). Most of these studies were conducted in the stock markets of the US, Australia, Canada, Tokyo Italy and London. However, Alagidede and Panagioditis (2006) belied the existence of both January and day-of-the week effects in their study of the Ghana stock Exchange, where they instead observed that the month of April shows a comparatively higher yield of returns of all months in a year - an observation that can be readily explained by the usual submission of company reports in late March during the year (pp. 75-88). Some of the so-called calendar anomalies, aside from the day-of-the-week and January effects, are: the turn-of-the-month effect; the holiday effect; the time-of-day effect (Jacobs & Levy 1988, pp. 28-36), the Ramadan effect (Seyyed et al, 2005), the school-is-out effect (Coakley et al 2007), among others. The day-of-the-week effect refers to the anomalies observe where average returns show a pattern of being higher on some days of the week compared to other days of the same week (Brooks & Persand 2001, p. 155). The turn-of-the-month effect as documented by Ariel (1984) in his study of 19 years stock index returns shows that the entire market cumulative advance for those years was contributed on the first half of the month as compared to the zero contribution in the next half of it. The Ramadan effect is another seasonality effect that is based on the Ramadan, the holy month of the Muslims where trading activities are observed to be comparatively low than in other months (Seyyed et al 2005). Various authors have a variety of explanations to explain away calendar anomalies ranging from psychological to social and to traditions. Thaler (1987) offers three suggestions he thinks are worth looking into. First, it could be custom-related. An example would be the custom of distributing pension and ...Show more

Summary

Calendar Anomalies: Definition and Background Information
Calendar anomalies, or seasonal effects, as applied to stock markets can be defined as “the tendency of financial assets returns to display systematic patterns at certain times of the day, week, month or year” (Brooks 2008, p. 454). …
Author : vhamill
Calendar Anomalies: Definition and Background Information essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the research paper on your topic
"Calendar Anomalies: Definition and Background Information"
with a personal 20% discount.
Grab the best paper

Related Essays

2012 the end of the world/ Mayan Calendar
It is a uniquely human tendency to seek patterns in randomness, or at least to seek any explanation for the phenomena that occur in our surroundings. This fascination often takes some down strange roads, trying to decipher predictions about the future from artifacts created thousands of years ago.
5 pages (1250 words) Research Paper
The Historyof the Calendar Then and Now
However, many people take the calendar for granted and different versions have come up depending on their purpose. Therefore, it is important to trace the history of the calendar to validate its relevance to the modern time. According to Judge (4), in earlier days, people measured time by observing nature such as the rising and setting of the sun, the movement of the moon and the stars, and other manifestations of nature manifestations in the environment such as human cries at dawn, cattle lowing in the gloaming, natural disasters, comets, heavy rains, changing seasons, cocks crowing in the morning, and so on.
4 pages (1000 words) Research Paper
Specific Background Information in Relation to AIDS
This is because no country in this world has a zero percent prevalence rate of the HIV disease. With Australia, the fact that the country is found in the Oceania alone does not present a very glooming picture of HIV infection for the country. This is because according to AVERT (2010), “the number of people living with HIV in Oceania almost doubled from 28,000 in 2001 to 57,000 in 2009.” This means that unlike other regions of the world, the Oceania keep having increasing infection rates.
10 pages (2500 words) Research Paper
Background to the Study
However, the whole idea behind loss aversion and the relative impact of losses and gains is normally a relative affair dependent on individual psychological positioning. In any case certain factors have the propensity to increase or reduce loss aversion in a person.
3 pages (750 words) Research Paper
General Background information about Bayer Health Care company
The Bayer Health Care division is one of the profitable divisions of Bayer Worldwide and hence is considered a “cash cow” by the parent company. The Bayer Health Care does not have a separate mission statement as well
4 pages (1000 words) Research Paper
Information Security: To design a secure, scalable, and responsive database security plan and requirements definition document for a Medical Records SAN (Storage Area Network)
In this scenario there is a dire need for the application of enhanced security and privacy solutions that ensure a scalable and responsive Medical Records SAN (Storage Area Network). In fact application of such security based solutions demands
10 pages (2500 words) Research Paper
Background information of Pepto-Bismo ( liquid Medication)
People are now storing it in refrigerators to maintain it in its actual inactive form. Under room temperature, the medication may become active and start reacting with any
2 pages (500 words) Research Paper
Research background information about crime prevention policies
For instance, a report given in 2005 from the National Academy of Sciences claimed that there was very little evidence concerning the best methods of reducing gun violence in the United States. Although various
2 pages (500 words) Research Paper
Research paper on CSX Corporation. Provide background information on the CSX Corporation, including the website link, financial information (annual sales and profits for the last three years), stock exchange information (if applicable), Ietc
The mergers of the two companies involved merging of the railway roads owned by both companies that eventually constituted the formation of the CSX Transportation Company. The company’s head office is currently located at Jacksonville Florida in the
8 pages (2000 words) Research Paper
AT&T Company background
AT&T has its presence in 225 countries across the globe, and in most of these countries it also provides data roaming and 3g services besides voice plans. It is worth mentioning here that AT&T’s business also
1 pages (250 words) Research Paper
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation