This paper presents evidence of the existence of a return effect on European stock markets coinciding with New York Stock Exchange (NYSE) holidays, which is particularly marked after positive closing returns on the NYSE the previous day. The effect is large enough to be exploited by trading index futures. This anomaly cannot be explained by seasonal effects, such as the day of the week effect, the January effect or the pre-holiday effect, nor is it consistent with behavioural finance models that predict positive correlation between trading volume and returns. However, examination of factors such as information volume or investor mix provides a reasonable explanation. Accounting and Finance 53 (2013) 111-136 nevertheless testified to a large number of such persistent effects in a wide variety of return series, across a broad range of stock markets.Seasonal effects are one of the more well-known abnormal return patterns, in particular, the day-of-the-week effect (see Marbely, 1990 andAbraham andIkenberry, 1994), the January effect (see Keim, 1988), the preholiday effect (see Smidt, 1988 or Meneu andPardo, 2004) and the summer vacation effect (Hong and Yu, 2009). The Monday effect is usually attributed to a preponderance of bad news over the weekend and to the high proportion of individual traders in the Monday morning investor mix. Fiscal motives and strategic behaviour on the part of institutional investors are the usual explanations given for the January Effect. The reasons for the pre-holiday effect are somewhat more complex, however, although there also appears to be some connection with the activity of individual traders, whose risk exposure is greater when trading alongside informed investors and who have difficulties in covering their positions prior to a holiday. Finally, the summer vacation effect appears to be related to a trading lull because of a significant percentage of both large-and small-scale investors being on holiday, this reduction in trading activity is associated with a significant stock return dip. The above effects may also be accompanied by derivative expiration day effects, a common phenomenon resulting from the effect of market-on-close orders by arbitrageurs to unwind their stock positions, speculative strategies around the expiration date, market manipulation and the kind of option and settlement procedure (see Klemkosky, 1978or Corredor et al., 2001.As far as we are aware, however, there is no academic evidence for another familiar stock market pattern, namely the seasonal effect on European markets during trading sessions coinciding with NYSE closure for one of the six US public holidays. These days are neither holidays nor pre-holidays in Europe; they are simply days on which there is no trading on the largest stock market in the world, from which European traders receive most of their market signals. 1 On days such as these, there are two factors that can make EU markets more likely to show some kind of average return or return variance pattern. One is that institutional tradin...

We find that momentum strategies yield profits in Latin American emerging markets. Both stock type and country play a major role in explaining the momentum effect in these markets, but stock type is much more important. For risk-averse investors, winner portfolios stochastically dominate loser portfolios in these markets, implying that there are no asset-pricing models consistent with risk-averse investors that can rationalize the momentum effect. The results obtained via the bootstrap procedure without replacement also uphold this conclusion.The momentum effect can be described basically as short-to medium-term persistence in stock returns; that is, winners and losers maintain the same return patterns for periods of approximately three to twelve months (Jegadeesh and Titman 1993). Though the bulk of the empirical evidence has been found for the U.S. market, 1 studies document the effect in other stock markets as well. Rouwenhorst (1998) finds evidence of the momentum effect in twelve European countries, Hon and Tonks (the country level. Fong et al. (2005) and Shen et al. (2005) present evidence of the momentum effect using international market indexes for both developed and emerging markets. Among a number of articles that analyze the momentum effect in emerging markets, Rouwenhorst (1999), Van der Hart et al. (2003), andGriffin et al. (2003) are all worth special mention. The overriding conclusion from all of the research is that momentum exists in emerging markets, but it is less intense than it is in more developed countries. However, the data used in the above-mentioned studies are not very recent; the last three studies cover periods from the 1980s to 1997, 1999, and 2000, respectively. Despite a number of different theories, the momentum effect, unlike other market anomalies, has never been explained to the unanimous satisfaction of researchers. Some authors suggest that the momentum effect is due to cross-sectional variations in stocks (see Conrad and Kaul 1998). Others claim that medium-term continuations are related to macroeconomic risk factors (Avramov and Chordia 2006; Chordia and Shivakumar 2002), and some attempt to relate the momentum effect to downside risk (Ang et al. 2001). Studies also link the effect to seasonal factors (Grinblatt and Moskowitz 2004; Hvidkjaer 2006) or to the importance of the transaction costs incurred in implementing momentum strategies (Lesmond et al. 2004) instead of implementing strategies of this type (Lesmond et al. 2004).Against such a background, attention must also be paid to explanations emerging from the study of investor behavior. Some authors who subscribe to the theory widely known as behavioral finance suggest that, by responding "irrationally" to various types of news, investors may provoke an underreaction, which would produce the momentum effect. Others have linked it to long-run overreaction (De Bondt and Thaler 1985), the theory being that the correction of delayed overreaction explains the long-term reversal, an overall perspective that captures both e...

This paper analyzes the role of default risk in the momentum effect focusing on data from four developed European stock markets (France, Germany, Spain and the United Kingdom). Using a market-based measure of default risk, we show that it is not the hidden factor behind this effect. While the loser portfolio is characterized by high default risk, small size, high book-to-market and illiquidity, characterization of the winner portfolio is somewhat more complex. Given that the momentum strategy is the return differential between the winners and the losers, factors such as the stock market cycle or the evolution of momentum portfolios against their reference point make momentum profits difficult to forecast.

We test for the existence of Favorite-Longshot Bias (FLB) in tennis betting exchanges. Despite these being order-driven markets, with no direct participation from bookmakers, we have found very similar results to those obtained by Lahvička (2014) for bookmakers' betting markets: the bias is stronger in matches between lower ranked players, in later round matches and in high profile tournaments. This suggests that bookmakers' adjustments to respond to informed betting are not the main driver of FLB. The varying magnitude of the bias across different types of event in the main market also weakens arguments linking FLB to gamblers' risk preferences, and suggests the need to consider the microstructure features of the market together with the cognitive biases highlighted in the behavioral finance literature.

Momentum effect, Market states, Behavioral finance, G12, G14,