| Abstract: |
This study examines the calendar anomalies in the Malaysian stock market.
Using various generalized autoregressive conditional heteroskedasticity
models; this study reveals the different anomaly patterns in this market for
before, during and after the Asian financial crisis periods. Among other
important findings, the evidence of negative Monday returns in post-crisis
period is consistent with the related literature. However, this study finds no
evidence of a January effect or any other monthly seasonality. The current
empirical findings on the mean returns and their volatility in the Malaysian
stock market could be useful in designing trading strategies and drawing
investment decisions. For instance, as there appears to be no
month-of-the-year effect, long-term investors may adopt the buy-and-hold
strategy in the Malaysia stock market to obtain normal returns. In contrast,
to obtain abnormal profit, investors have to deliberately looking for
short-run misaligned price due to varying market volatility based on the
finding of day-of-the-week effect. Besides, investors can use the
day-of-the-week effect information to avoid and reduce the risk when investing
in the Malaysian stock market. Further analysis using EGARCH and TGARCH models
uncovered that asymmetrical market reactions on the positive and negative
news, rendering doubts on the appropriateness of the previous research that
employed GARCH and GARCH-M models in their analysis of calendar anomalies as
the later two models assume asymmetrical market reactions. |