Seasonal Anomalies: A Closer Look at the Johannesburg Stock Exchange

Abstract

We examine seasonal anomalies in Johannesburg daily stock returns from January 1973 to September 2012. This paper focuses on three seasonal effects: day-of-the-week, beginning-of-the-month and month-of-the-year. We found no compelling evidence for either a January or December effect in the South African market. Instead, our results support the presence of strong Monday and Tuesday effects, whereby the returns on Monday and Tuesday are significantly lower than the return on the benchmark day of Wednesday. Moreover, the beginning-of-the-month effect is quite pronounced in which second and third trading day returns are significantly larger than returns in other trading days. Nevertheless, these strong day-of-the-week and beginning-of-the-month seasonal effects disappear in the post-2008 period following the global financial crisis. It appears that the South African stock market may have filtered out seasonal anomalies and become more efficient in the aftermath of the recent global financial crisis.

The day-of-the-week effect: South African stock market indices

“…Our results indicate that the most significant and consistent pattern are on Mondays, where all coefficients are positive, and Fridays, where all coefficients are negative. These results are similar to the findings ofAlagidede (2008),Darrat et al (2013) andNdako (2013), who all used similar statistical techniques to this study and South African data.Moreover, the day-of-the-week effect in both mean and conditional volatility is sensitive to the choice of error distribution. In all the cases, the conditional volatility varies with the days of the week.…”

“…Brusa and Liu (2004) found the traditional weekend effect to be present in the US market, but that it reversed between 1988 and 1998. More recently, Mlambo and Biekpe (2006), Alagidede (2008), Mbululu and Chipeta (2012), Darrat et al (2013) and Plimsoll et al (2013) all confirm the presence of limited and spurious day-of-the week effects on the indices of different African stock markets. However, because results differ across industries, stock markets, and periods, no definitive conclusion about the presence of any such effects can be confirmed.…”

Revisiting Calendar Anomalies in Brics Countries

“…Daily, weekly, and monthly effects can be referred to as seasonalities, where "seasonality is a usual and recurring variation in a time series that occurs occasionally over a span of less than a year" (Prajapati et al, 2013). Therefore, it would be possible for investors to predict stock market developments based on past information and profit from the abnormal returns resulting from these effects (e.g., Darrat et al, 2013;Sharma et al, 2014). This behavior portends market inefficiency, since it should be impossible to generate abnormal returns because of systematic price changes, and these anomalies should not exist in an efficient market (e.g., Safeer and Kevin, 2014;Patel, 2016).…”

Month-of-the-year Effects in Nepalese Stock Market

“…In an effort to explain the calendar effects in the Johannesburg stock Exchange, Darrat, Li and Chung (2013) observed that no compelling evidence for either a January or December effect in South African Market. On the contrary, the study on January effect, Sudarvel and Velmurugan (2015) confirmed the existence of seasonality in stock returns in Bombay Stock Exchange's banking sector and the existence of January effect.…”