Abstract:
Calendar effects, as a stylized facet inherent in financial markets, are important as financial markets globally exhibit seasonal effects with regards to abnormal market returns during certain periods. The existence of these seasonal anomalies is perceived to be in contravention of the notion that markets are inherently efficient, a metric by which an individual market is gauged against the global financial landscape in terms of its transparency and competitiveness. Research coverage on seasonal anomalies locally, is sparse dated, often employing methodologies which do not adequately cater to the time varying levels of volatility inherent in our markets. In this research, daily, monthly and sizeeffect anomalies are investigated whereby the prevalence of certain monthly calendar effects is shown to exist, by employing a Markov-switching regime switching methodology and allowing transitional probabilities to vary between regimes over time.
