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Month of the Year Effect and January Effect in Pre-WWI Stock Returns: Evidence from a Non-linear GARCH Model

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  • Choudhry, Taufiq

Abstract

This paper investigates seasonal anomalies in the mean stock returns of Germany, the UK and the US during pre-World War I (WWI) period. The anomalies studied are month of the year effect and the January effect. The empirical research is conducted using a non-linear GARCH-t model, and monthly returns. Results obtained provide evidence of the January effect and the month of the year effect on the UK and the US returns. The German returns shows the month of the year effect but no January effect. Given the lack of tax treatment of capital gains/loss before 1914 by these countries, the results fail to provide merit to the tax-loss selling hypothesis of the January effect. Since we apply value-weighted returns in all cases, results obtained also fail to provide support for the small firm effect. Copyright @ 2001 by John Wiley & Sons, Ltd. All rights reserved.

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  • Choudhry, Taufiq, 2001. "Month of the Year Effect and January Effect in Pre-WWI Stock Returns: Evidence from a Non-linear GARCH Model," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(1), pages 1-11, January.
    • Handle: RePEc:ijf:ijfiec:v:6:y:2001:i:1:p:1-11
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    1. Stefanescu, Razvan & Dumitriu, Ramona, 2013. "MOY effects in returns and in volatilities of the Romanian capital market," MPRA Paper 52474, University Library of Munich, Germany, revised 28 Oct 2013.
    2. Betty Agnani & Henry Aray, 2011. "The January effect across volatility regimes," Quantitative Finance, Taylor & Francis Journals, vol. 11(6), pages 947-953.
    3. Paul Alagidede & Theodore Panagiotidis, 2009. "Calendar Anomalies in the Ghana Stock Exchange," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 8(1), pages 1-23, April.
    4. Paul Alagidede & Theodore Panagiotidis, 2006. "Calendar Anomalies in an Emerging African Market: Evidence from the Ghana Stock Exchange," Discussion Paper Series 2006_13, Department of Economics, Loughborough University, revised Jun 2006.
    5. Floros, Christos & Salvador, Enrique, 2014. "Calendar anomalies in cash and stock index futures: International evidence," Economic Modelling, Elsevier, vol. 37(C), pages 216-223.
    6. Konstantinos Drakos, 2009. "Cross-Country Stock Market Reactions to Major Terror Events: The Role of Risk Perception," Economics of Security Working Paper Series 16, DIW Berlin, German Institute for Economic Research.
    7. Mohammadali Fallah & Palani‐Rajan Kadapakkam, 2023. "Long‐term capital gains taxes and stock prices: Evidence from India," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 3033-3054, July.
    8. Konstantinos Drakos, 2009. "Big Questions, Little Answers: Terrorism Activity, Investor Sentiment and Stock Returns," Economics of Security Working Paper Series 8, DIW Berlin, German Institute for Economic Research.
    9. Giovanis, Eleftherios, 2009. "The Month-of-the-year Effect: Evidence from GARCH models in Fifty Five Stock Markets," MPRA Paper 22328, University Library of Munich, Germany.
    10. Ramona Dumitriu & Razvan Stefanescu, 2013. "Gone Fishin’ Effects on the Bucharest Stock Exchange," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 13(1), pages 107-116.
    11. Girardin, Eric & Salimi Namin, Fatemeh, 2019. "The January effect in the foreign exchange market: Evidence for seasonal equity carry trades," Economic Modelling, Elsevier, vol. 81(C), pages 422-439.
    12. Subadar Agathee Ushad, 2009. "Seasonality, returns and volatility on the Stock Exchange of Mauritius," Applied Economics Letters, Taylor & Francis Journals, vol. 16(5), pages 545-548.
    13. Konstantinos Drakos, 2010. "Terrorism activity, investor sentiment, and stock returns," Review of Financial Economics, John Wiley & Sons, vol. 19(3), pages 128-135, August.
    14. Plastun, Alex & Sibande, Xolani & Gupta, Rangan & Wohar, Mark E., 2020. "Historical evolution of monthly anomalies in international stock markets," Research in International Business and Finance, Elsevier, vol. 52(C).
    15. Giovanis, Eleftherios, 2009. "Calendar Effects and Seasonality on Returns and Volatility," MPRA Paper 64404, University Library of Munich, Germany.
    16. Dumitriu, Ramona & Stefanescu, Razvan, 2013. "Efecte Gone Fishin’ la Bursa de Valori din Bucureşti [Gone Fishin’ Effects on the Bucharest Stock Exchange]," MPRA Paper 52473, University Library of Munich, Germany, revised 28 Sep 2013.
    17. Pierdzioch, Christian, 2004. "Feedback Trading and Predictability of Stock Returns in Germany, 1880?1913," Kiel Working Papers 1213, Kiel Institute for the World Economy (IfW Kiel).
    18. Chia, Ricky Chee-Jiun & Liew, Venus Khim-Sen & Syed Khalid Wafa, Syed Azizi Wafa, 2006. "Calendar anomalies in the Malaysian stock market," MPRA Paper 516, University Library of Munich, Germany.
    19. Wong Pik Har & Lim Wei Chih, 2016. "Effects of Holidays on the Malaysian Stock Exchange," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(2), pages 274-274, January.
    20. Konstantinos Drakos, 2011. "Behavioral Channels in the Cross‐Market Diffusion of Major Terrorism Shocks," Risk Analysis, John Wiley & Sons, vol. 31(1), pages 143-159, January.
    21. Selim Aren & Lutfihak Alpkan & Bulent Sezen & Ziya Alper Guncu, 2011. "Drivers of firms’ debt ratios: evidence from Taiwanese and Turkish firms," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 13(1), pages 53-70, May.
    22. Stefanescu, Razvan & Dumitriu, Ramona, 2013. "Month-of-the-year effects on Romanian capital market before and after the adhesion to European Union," MPRA Paper 53069, University Library of Munich, Germany, revised 04 Apr 2013.

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