Market Anomalies and Effect on Returns

This research aims to analyse market anomalies and their effects on returns in the Indonesian and significant world indexes between 2010 and 2016. The sample period is divided into two sub-periods, 2010 to 2013 and 2014 to 2016 to indicate the persistence of the monthly effect. This research utilises the purposive sampling method, also known as the judgmental sampling method, of weekly returns from Indonesian indexes and major world indexes based on specific criteria. Consequently, the samples that meet the criteria consist of six Indonesian indexes (BISNIS27, JKSE, KOMPAS100, LQ45, PEFINDO25 and SRIKEHATI) and four major world indexes (the CAC40 from France, Germany's DAX, the FTSE100 from England and Spain's IBEX35). The ordinary least squares (OLS) and the Generalised Autoregressive Conditional Heteroskedasticity (GARCH) (1, 1) models are used to analyse the data. The findings show an anomalous month of the year effect exists in some Indonesian indexes and major world indexes during the research period. The intensity of month of the year anomalies diminishes with time. September effects can be found in most Indonesian indexes such as the JKSE during the first sub-period. January and April's effects are found in later sub-periods. For the major world indexes, May's effect is found in Spain's IBEX35 in the earlier sub-period, and February's effect is found in England's FTSE100 in the later sub-period. The research also indicates that month of the year effects are more persistent among indexes with smaller market capitalisation.