An Investigation of the Month-of-The-Year Effect for the Sudanese Stock Market

This paper investigates the month-of-the-year effect for the Sudanese stock market by using daily closing values of the market index over the period January 2, 2008, to December 30, 2014. Ordinary Least Squares technique and two different specifications of the Generalized Autoregressive Conditional Hetroscedastic model are applied to see how average returns of the Khartoum Stock Exchange (KSE) index are statistically different across months of the year. Empirical results suggest that the possible month-of-the-year effect in KSE is generally murky, especially for the market returns. Based on volatility equation however, the results show very little evidence that the market can be characterized by significant positive returns during the first few months of the year and negative returns over the last months. These results indicate that KSE seems to be an informationally inefficient market and therefore, investors cannot take any advantage of information about a single month of the year when taking investment decisions to gain abnormal returns and consequently they should not consider this calendar anomaly when formulating their portfolios. It is left to future research, when appropriate data will be available to investigate how calendar anomalies are valid at the sectoral and firm levels for the KSE market.