Testing the Significance of Calendar Effects
This paper studies tests of calendar effects in equity returns. It is necessary to control for all possible calendar effects to avoid spurious results. The authors contribute to the calendar effects literature and its significance with a test for calendar-specific anomalies that conditions on the nuisance of possible calendar effects. Thus, their approach to test for calendar effects produces robust data-mining results. Unfortunately, attempts to control for a large number of possible calendar effects have the downside of diminishing the power of the test, making it more difficult to detect actual anomalies. The authors show that our test achieves good power properties because it exploits the correlation structure of (excess) returns specific to the calendar effect being studied. We implement the test with bootstrap methods and apply it to stock indices from Denmark, France, Germany, Hong Kong, Italy, Japan, Norway, Sweden, the United Kingdom, and the United States. Bootstrap p-values reveal that calendar effects are significant for returns in most of these equity markets, but end-of-the-year effects are predominant. It also appears that, beginning in the late 1980s, calendar effects have diminished except in small-cap stock indices.
(This abstract was borrowed from another version of this item.)
|Date of creation:||2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- G. William Schwert, 2002.
"Anomalies and Market Efficiency,"
NBER Working Papers
9277, National Bureau of Economic Research, Inc.
- Jeffrey Jaffe & R. Westerfield, . "The Week-End Effect in Common Stock Returns: The International Evidence," Rodney L. White Center for Financial Research Working Papers 03-85, Wharton School Rodney L. White Center for Financial Research.
- Gordon Tang, 1998. "Monthly Pattern and Portfolio Effect on Higher Moments of Stock Returns: Empirical Evidence from Hong Kong," Asia-Pacific Financial Markets, Springer, vol. 5(3), pages 275-307, November.
- Husain, Fazal, 1998.
"A Seasonality in the Pakistani Equity Market: The Ramadhan Effect,"
5032, University Library of Munich, Germany.
- Fazal Husain, 1998. "A Seasonality in the Pakistani Equity Market: The Ramadhan Effect," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 37(1), pages 77-81.
- Khaksari, Shahriar & Bubnys, Edward L, 1992. "Risk-Adjusted Day-of-the-Week, Day-of-the-Month, and Month-of-the-Year Effects on Stock Indexes and Stock Index Futures," The Financial Review, Eastern Finance Association, vol. 27(4), pages 531-52, November.
- Diebold, Francis X & Mariano, Roberto S, 1995.
"Comparing Predictive Accuracy,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 13(3), pages 253-63, July.
- Francis X. Diebold & Robert S. Mariano, 1994. "Comparing Predictive Accuracy," NBER Technical Working Papers 0169, National Bureau of Economic Research, Inc.
- Tom Doan, . "DMARIANO: RATS procedure to compute Diebold-Mariano Forecast Comparison Test," Statistical Software Components RTS00055, Boston College Department of Economics.
- Goncalves, Silvia & de Jong, Robert, 2003. "Consistency of the stationary bootstrap under weak moment conditions," Economics Letters, Elsevier, vol. 81(2), pages 273-278, November.
- Agrawal, Anup & Tandon, Kishore, 1994. "Anomalies or illusions? Evidence from stock markets in eighteen countries," Journal of International Money and Finance, Elsevier, vol. 13(1), pages 83-106, February.
- Lakonishok, Josef & Levi, Maurice, 1982. " Weekend Effects on Stock Returns: A Note," Journal of Finance, American Finance Association, vol. 37(3), pages 883-89, June.
- Asger Lunde & Peter Reinhard Hansen, 2001.
"A Forecast Comparison of Volatility Models: Does Anything Beat a GARCH(1,1)?,"
2001-04, Brown University, Department of Economics.
- Asger Lunde & Peter R. Hansen, 2005. "A forecast comparison of volatility models: does anything beat a GARCH(1,1)?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(7), pages 873-889.
- Jaffe, Jeffrey & Westerfield, Randolph, 1989. "Is there a monthly effect in stock market returns? : Evidence from foreign countries," Journal of Banking & Finance, Elsevier, vol. 13(2), pages 237-244, May.
- Jeffrey Jaffe & R. Westerfield, . "The Week-End Effect in Common Stock Returns: The International Evidence," Rodney L. White Center for Financial Research Working Papers 3-85, Wharton School Rodney L. White Center for Financial Research.
- Halbert White, 2000. "A Reality Check for Data Snooping," Econometrica, Econometric Society, vol. 68(5), pages 1097-1126, September.
- repec:att:wimass:9417 is not listed on IDEAS
- Kim, Chan-Wung & Park, Jinwoo, 1994. "Holiday Effects and Stock Returns: Further Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(01), pages 145-157, March.
- Rogalski, Richard J, 1984. " New Findings Regarding Day-of-the-Week Returns over Trading and Non-trading Periods: A Note," Journal of Finance, American Finance Association, vol. 39(5), pages 1603-14, December.
- Kenneth D. West, 1994.
"Asymptotic Inference About Predictive Ability,"
- Aggarwal, Reena & Rivoli, Pietra, 1989. "Seasonal and Day-of-the-Week Effects in Four Emerging Stock Markets," The Financial Review, Eastern Finance Association, vol. 24(4), pages 541-50, November.
- Merton, Robert C., 1985. "On the current state of the stock market rationality hypothesis," Working papers 1717-85., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- West, Kenneth D. & Cho, Dongchul, 1995.
"The predictive ability of several models of exchange rate volatility,"
Journal of Econometrics,
Elsevier, vol. 69(2), pages 367-391, October.
- West, K.D. & Cho, D., 1993. "The Predictive Ability of Several Models of Exchange Rate Volatility," Working papers 9317r, Wisconsin Madison - Social Systems.
- Tom Doan, . "WESTCHOTEST: RATS procedure to perform Heteroscedasticity-robust serial correlation test," Statistical Software Components RTS00252, Boston College Department of Economics.
- Kenneth D. West & Dongchul Cho, 1994. "The Predictive Ability of Several Models of Exchange Rate Volatility," NBER Technical Working Papers 0152, National Bureau of Economic Research, Inc.
- Kato, Kiyoshi & Schallheim, James S., 1985. "Seasonal and Size Anomalies in the Japanese Stock Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 20(02), pages 243-260, June.
- Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-617, December.
- French, Kenneth R., 1980. "Stock returns and the weekend effect," Journal of Financial Economics, Elsevier, vol. 8(1), pages 55-69, March.
- Keim, Donald B & Stambaugh, Robert F, 1984. " A Further Investigation of the Weekend Effect in Stock Returns," Journal of Finance, American Finance Association, vol. 39(3), pages 819-35, July.
- Levis, Mario, 1989. "Stock market anomalies: A re-assessment based on the UK evidence," Journal of Banking & Finance, Elsevier, vol. 13(4-5), pages 675-696, September.
- Josef Lakonishok, Seymour Smidt, 1988. "Are Seasonal Anomalies Real? A Ninety-Year Perspective," Review of Financial Studies, Society for Financial Studies, vol. 1(4), pages 403-425.
- Sidney B. Wachtel, 1942. "Certain Observations on Seasonal Movements in Stock Prices," The Journal of Business, University of Chicago Press, vol. 15, pages 184.
- Sullivan, Ryan & Timmermann, Allan & White, Halbert, 2001. "Dangers of data mining: The case of calendar effects in stock returns," Journal of Econometrics, Elsevier, vol. 105(1), pages 249-286, November.
- Ariel, Robert A., 1987. "A monthly effect in stock returns," Journal of Financial Economics, Elsevier, vol. 18(1), pages 161-174, March.
- Wang, Ko & Li, Yuming & Erickson, John, 1997. " A New Look at the Monday Effect," Journal of Finance, American Finance Association, vol. 52(5), pages 2171-86, December.
- Hansen, Peter Reinhard, 2005. "A Test for Superior Predictive Ability," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 365-380, October.
- Tang, G. Y. N. & Kwok, K-h., 1997. "Day of the week effect in international portfolio diversification: January vs non-January," Japan and the World Economy, Elsevier, vol. 9(3), pages 335-352, August.
- Barone, E., 1990. "The italian stock market : Efficiency and calendar anomalies," Journal of Banking & Finance, Elsevier, vol. 14(2-3), pages 483-510, August.
- Peter Hansen, 2003. "Asymptotic Tests of Composite Hypotheses," Working Papers 2003-09, Brown University, Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:bro:econwp:2003-03. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Brown Economics Webmaster)
If references are entirely missing, you can add them using this form.