Calendar Effects

The conflicting presence of security price anomalies in stock exchange markets has been one of the most popular topics of research among academicians, economists, statisticians and market experts for many decades, as it provides the prospect of making unusual profits for investors. Several surveys have been conducted not only in developed countries like UK but also in emerging markets like China, in order to provide secure evidence for the presence of any stock anomalies. According to Ainhoa Ceresuela-Callen (2007) these calendar irregularities, also known as calendar effects, are systematic variations in the returns of stock prices related to specific times of the year. The most broad known calendar anomalies are the January effect, Monday effect and Holiday effect which have perplexed financial economists for more than 50 years.

1. January effect

The most significant and well-examined calendar anomaly is the “January effect”, also known as the turn of the year effect. According to this phenomenon the performance of stocks are not equal for all the months of the year. In particularly, the common stocks have higher returns in January in comparison with the other eleven months and as a result the investors can make unusual profits. There are numerous of researches which studied and corroborated the presence of this calendar anomaly in several exchange stock markets. However, there are a lot of contemporary surveys that diminish the existence of this effect. Wachtel (1942) was the first who examined the presence of the January effect in Dow Jones Index (USA) for the time period 1927-1942. Wachtel reported high returns in January in comparison with the other months. Another significant research was published by Rozeff and Kinney...

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