Month-of-the-year and pre-holiday seasonality in African stock markets

Citation

Alagidede P (2008) Month-of-the-year and pre-holiday seasonality in African stock markets. Stirling Economics Discussion Paper, 2008-23.

Abstract
Seasonal anomalies (calendar effects) may be loosely referred to as the tendency for financial asset returns to display systematic patterns at certain times of the day, week, month or year. Two popular calendar effects are investigated for African stock returns: the month-of-the-year and the pre-holiday effects, and their implication for stock market efficiency. We extend the traditional approach of modelling anomalies using OLS regressions and, examine both the mean and conditional variance. We find high and significant returns in days preceding a public holiday for South Africa, but this finding is not applicable to the other stock markets in our sample. Our results also indicate that the month-of-the-year effect is prevalent in African stock returns. However, due to liquidity and round trip transactions cost the anomalies uncovered may not necessarily violate the no-arbitrage condition. Finally we discuss promising areas for future research using developing stock markets data.

Keywords
Calendar effects; African stock markets; month of the year and pre-holiday effects

JEL codes

• C22: Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
• C52: Model Evaluation, Validation, and Selection
• G10: General Financial Markets: General (includes Measurement and Data)

• SEDP-2008-23-Alagidede.pdf