Month of the year effect and January effect in pre‐WWI stock returns: evidence from a non‐linear GARCH model

Abstract

This paper investigates seasonal anomalies in the mean stock returns of Germany, the UK and the US during pre-World War I (WWI) period. The anomalies studied are month of the year effect and the January effect. The empirical research is conducted using a non-linear GARCH-t model, and monthly returns. Results obtained provide evidence of the January effect and the month of the year effect on the UK and the US returns. The German returns shows the month of the year effect but no January effect. Given the lack of tax treatment of capital gains/loss before 1914 by these countries, the results fail to provide merit to the tax-loss selling hypothesis of the January effect. Since we apply value-weighted returns in all cases, results obtained also fail to provide support for the small firm effect.

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

“…The studies conducted by Nassir and Mohammad (1987), Pang (1988), Ayadi et al (1998) and Coutts and Sheikh (2000) have also discovered the existence of monthly effect for the emerging markets. However, they also found the same results as Wahlroos and Berglund (1983), Choudhry (2001), and Mehdian and Perry (2002); indicating unavailability of January effect for the some emerging markets. In addition to day of the week effect and the monthly effect; Wong and Ho (1986), Lakonishok and Smidt (1988), Wilson and Jones (1993), Mills and Coutts (1995), Chan et al (1996), Arsad and Coutts (1997), Mookerjee and Yu (1999), , and Abeysekera (2001) have considered holiday effect as well.…”

“…Apart from the day of the week effect, Wahlroos and Berglund (1983), Choudhry (2001), and Mehdian and Perry (2002) have examined the monthly effect of the developed markets. Though, they have found the monthly effect; were unable to find the positive and higher January effect especially for the post war period.…”

“…(Choudhry, 2001;Mehdian & Perry, 2002;Nassir & Mohammad, 1987). According to them, the average return in January is higher than any other month of the year.…”

Month-of-the-Year Effects on Romanian Capital Market before and after the Adhesion to European Union

“…The development of GARCH models stimulated the investigation on monthly seasonality of capital markets not only on the stock returns but also on volatility [ 8,11,19,24] In this paper we investigate the presence of Month-of-the-year effects on the Romanian capital market from 2000 to 2012. The Bucharest Stock Exchange (BSE) evolution in this period of time passed two stages.…”

Seasonality, returns and volatility on the Stock Exchange of Mauritius

“…However, according to Ho and Cheung (1994), it is also important to consider fluctuations in volatility across the days of the week as high returns on a specific day may be attributed to higher risk on that day. In fact, based on the study of Choudhry (2001), 'study of the effects of any seasonality has been limited'. According to some studies, 2 financial time series seem to exhibit properties such as leptokurtosis, skewness and time-varying volatilities.…”