An Empirical Investigation on Stock Market Anomalies: The Evidence from Colombo Stock Exchange in Sri Lanka

Abstract

The current study examines the Stock Market Anomalies in Colombo Stock Exchange (CSE); Sri Lanka during the period of 2004 to 2013. The existences of both Day of the Week Effect and Monthly Effect have been tested using daily and monthly data respectively. The Ordinary Least Squares (OLS) method and GARCH (1, 1) model were employed to capture the Day of the Week effects and Monthly Effects along with the daily volatility behavior. The sample period was divided in to two periods as War Period and Post War Period in order to take the impacts of the War in to account. The results indicate the presence of negative Monday effect and the positive effects for all other days only for the war period. Further, the positive volatility effect on Monday and the negative volatility effect on Friday have been examined for both war period and the entire sample period with significant Wald F statistics. Despite, the positive January effects are common for all sample periods, the negative December effects cannot be identified for post war period. Hence, the study confirms the existence of Stock Market anomalies; both day of the week effect and monthly effect particularly during the war period. Moreover, these seasonality patterns limit the validity of Efficient Market Hypothesis in the context of Colombo Stock Exchange.Keywords: day of the week effect, monthly effect, efficient market hypothesis, volatility effect, stock market anomalies

Are prolonged conflict and tension deterrents for stock market integration? The case of Sri Lanka

“…This led Deyshappriya (2014) to conclude that the relatively favorable economic condition during the post-war period might have reduced the volatility and risk attached to the CSE.…”

“…It appears that the impact of a civil war on stock market linkages between countries, using the DCC model in particular, has not been researched before. None of the three studies (involving Sri Lanka) that have touched on this topic, consider the Sri Lankan conflict in depth (Kumara et al, 2014;Peiris, 2012;Deyshappriya, 2014; see Section 1.3 for a review of these studies).…”

Day-of-The-Week Anomaly on Different Stock Capitalization: Evidence from Indonesian Stock Market

“…Calendar anomaly defined as the presence of recurring patterns that occur at certain calendar points, e.g. certain month or day, which provides opportunities for investors to earn abnormal returns (Deyshappriya, 2014). Calendar anomaly has been found to exist in the various stock markets in many countries, not least in the developed countries like USA, Japan, UK, France, Austria, Belgium, Canada, Denmark, Germany, Ireland, Italy, The Netherlands, Norway, Singapore, and Spain (Dicle and Levendis, 2012;Das and Rao, 2011;Bouman and Jacobsen, 2002).…”

“…Therefore recent studies of calendar anomalies tend to be done in developing countries (Cifuentes and Cordoba, 2013). Studies on developing countries are more likely to produce findings about the calendar anomaly (Singh, 2014;Mouselli and Al-Samman, 2016;Deyshappriya, 2014;Alrabadi and Al-Qudah, 2012;Brahmana, Hooy, and Ahmad, 2011;Angelovska, 2014). Indonesia, which is also a developing country, has also become the object of study of calendar anomalies in the previous literature.…”

Pattern Recognition Applied to Chart Analysis. Evidence From Intraday International Stock Markets

“…One classical effect is called Monday effect which states that "asset returns are lower or negative on Mondays relative to other days of the week" (Aly . This is an indication that analysed markets were not efficient in the considered period (Deyshappriya, 2014).…”