Day-of-the-week effect in Nigerian stock exchange: adaptive market hypothesis approach

Abstract

The problems that this study informed are rooted in the uncertainty surrounding the presence of calendar anomalies in the Nigerian stock market and the need to ascertain whether calendar anomaly is changing with time and market condition according to the adaptive market hypothesis. This study evaluates how calendar anomaly behaves over time in the Nigerian stock market through the day-of-the-week effect since the latest trend is to examine time-changing anomaly. The general All Share Index returns of the Nigerian Stock Exchange between 2000 and 2017 are used in the analysis. Secondary daily index returns data for the period are sourced from the NSE Fact Book. The major estimation techniques employed in the study are the mean equations of the generalized autoregressive conditional heteroscedasticity (GARCH) and overlapping sub-period methodology. Moreover, returns are grouped into Up and Down periods depending on the periods that generate positive and negative returns, respectively. This study found out that Monday (MON), Tuesday (TUE), and Friday (FRI) effects are the only adaptive day-of-the-week effects. Thus, three (MON, TUE, FRI) day of the week effects found in the full sample are time-varying in subsample and are affected by market condition. On the whole, MON and Thursday (THUR) effects are found in Bull, while TUE and FRI are found in Bear. The investor must be careful to take time-variation into consideration; otherwise, they may incur a loss by thinking that the day-of-the-week effect is present every time.

The Day-of-the-Week Effect and the Adaptive Market Hypothesis in Latin American Stock Markets

“…The time-changing behavior of the DOW effect found in this study has been previously reported for the stock markets in countries such as the United States (Urquhart & McGroarty, 2014), the United Kingdom (Rosini & Shenai, 2020), China (Xiong et al, 2019), and Nigeria (Adaramola & Adekanmbi, 2020), and tends to support the AMH. Interestingly, however, the Argentine stock market index exhibits no evidence of the DOW effect for any of the subperiods.…”

A Forecasting Model Approach: Investigating Calendar Anomalies and Volatility Patterns in the Cryptocurrency Market

“…The market conditions may cause these anomalies to vary over time, so a detailed analysis of their dynamics is necessary [16]. The Russian bond and stock markets, Turkish markets, US markets, Asia-Pacific stock markets, Thai stock market, Gulf Cooperation Council stock exchanges, Nigerian stock market, and Swedish stock market have historically noted calendar anomalies [17][18][19][20][21][22].…”

South African Real Estate Investment Trusts Prefer Tuesdays

“…While some studies, such as Rossi and Gunardi (2018) and Miss et al (2020), show a persistent effect in specific markets, others, such as Birru (2018) and Chiah and Zhong (2021), find no significant impact in other markets. Gbeda and Peprah (2018) and Akbalik and Ozkan (2017) investigate the day-of-the-week effect on the Nairobi Stock Exchange and Indonesia, respectively, while Adaramola and Adekanmbi (2020) examine the same phenomenon in Nigeria. Paital and Panda (2018) and Chancharat et al (2020) explored the day-of-the-week effect in India and Thailand, respectively, and discovered anomalies in market returns.…”