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Day of the week effect and stock market volatility in Ghana and Nairobi stock exchanges

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  • James Mark Gbeda

    (University of Cape Coast)

  • James Atta Peprah

    (University of Cape Coast)

Abstract

We examine Day-of-the-Week Effect anomaly and volatility in returns on Ghana Stock Exchange (GSE) and Nairobi Stock Exchange (NSE) using daily closing price indices from 2005 to 2014. Ordinary Least Square regression with autoregressive term, GARCH (1, 1), TGARCH (1, 1) and EGARCH (1, 1) were used. There is no evidence of day-of-the-week effect in GSE but there exists Friday effect in NSE. Daily returns could be predicted in NSE but cannot be predicted in the GSE using past prices and returns information. The GARCH model suggests a high degree of persistent in the conditional volatility of daily stock returns in NSE. The TGARCH and EARCH models show no evidence of asymmetry in daily returns in NSE. However, there was no evidence of conditional volatility for GSE-CI. The two markets are inefficient and whiles day of the week effects are irrelevant in making investment decisions in GSE it is relevant in NSE. Reduction in trade settlement periods to t + 1 and promoting internet usage will make market information freely available to all investors hence making the markets more efficient.

Suggested Citation

  • James Mark Gbeda & James Atta Peprah, 2018. "Day of the week effect and stock market volatility in Ghana and Nairobi stock exchanges," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 42(4), pages 727-745, October.
    • Handle: RePEc:spr:jecfin:v:42:y:2018:i:4:d:10.1007_s12197-017-9409-7
    DOI: 10.1007/s12197-017-9409-7
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    Cited by:

    1. Adeabah, David & Abakah, Emmanuel Joel Aikins & Tiwari, Aviral Kumar & Hammoudeh, Shawkat, 2023. "How far have we come and where should we go after 30+ years of research on Africa's emerging financial markets? A systematic review and a bibliometric network analysis," Emerging Markets Review, Elsevier, vol. 55(C).
    2. Badal Khan & Muhammad Aqil & Syed Hasnain Alam Kazmi & Syed Imran Zaman, 2023. "Day‐of‐the‐week effect and market liquidity: A comparative study from emerging stock markets of Asia†," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 544-561, January.
    3. Li, Wenlan & Cheng, Yuxiang & Fang, Qiang, 2020. "Forecast on silver futures linked with structural breaks and day-of-the-week effect," The North American Journal of Economics and Finance, Elsevier, vol. 53(C).
    4. Daniel Agyapong & Theophilus Sakyiamah Atuah & Anthony Asare- Adu Idun, 2020. "Calendar Effect and Returns of Listed Companies on the Ghana Stock Exchange: A DOLS and GARCH Modelling," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(8), pages 920-935, August.
    5. Mohamed CHIKHI & Ali BENDOB & Ahmed Ramzi SIAGH, 2019. "Day-of-the-week and month-of-the-year effects on French Small-Cap Volatility: the role of asymmetry and long memory," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 10, pages 221-248, December.

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    More about this item

    Keywords

    Day of the week effect; Ghana stock exchange; Nairobi stock exchange;
    All these keywords.

    JEL classification:

    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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