The Abnormal Returns and Volatility of Industry Stock Prices Arising from Holiday Effect: Evidence from Taiwan
Shen, Yen Hung
Hu, Jin Li
|關鍵字:||日曆異常;節日效果;一般化自我迴歸條件變異模型;市場效率性;異常報酬;異常變異;Calendar Anomaly;Holiday Effect;GARCH Model;Market Efficiency;Abnormal Returns;Abnormal Volatility|
The calendar anomalies in stock market have been widely studied in previous literature. However, the reason of holiday effect has not yet received common explanation among scholars. The paper examines abnormal return and abnormal volatility of both TAIEX and its eighteen sub-industry indexes from January 2000 to December 2012 by GARCH model. Generally, the empirical results show that during pre and post holiday, TAIEX significantly generates five to six times abnormal positive returns than do non-holiday periods, while it is hard to exploit real profit when trading costs are all taken into consideration, indicating that stock market in Taiwan is somewhere between efficient and inefficient. The regular patterns are that positive return with lower volatility presented one day before holiday, and positive return with higher volatility presented one day after the holiday. This paper then further categorizes holidays into different groups, for example, state holiday or cultural holiday, and the length of the each holiday. Interesting findings can be concluded separately. Finally, the results also show the effect investigated in this paper is robust to financial crisis. Overall, the holiday effect exists in TWSE, and the notion that higher return accompanied with lower risk does appear in some particular situations. The research suggests a new investing strategy for investors in Taiwan.