Department of Management Science

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Subject: search.filters.subject.anomalies

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    The Holy Day Effect and Stock Performance: Evidence from Asian and African Markets
    (Library Information Services COMSATS University Islamabad Lahore Campus, 2016-02-03) IRFAN ALI; FA13-MSMS-024; Dr. Waheed Akhter; LHR TP 4370
    Religion play an important role in people’s lives but its impact on stock markets is rarely investigated. Past literature of calendar anomalies mostly established on the Gregorian calendar such as day of the week, turn of the year and holiday effects etc. However, Islamic calendar anomalies are hardly investigated in finance literature. To explore this issue, this study examines the impact of Muslim’s Holy Days (Ashura, Eid Melad-un-Nabi (SAW), Ramadan, Eid-ul-Fitr and Eid-ul-Adha) on daily stock returns of Asian and African Muslim financial markets for a period of 2001 to 2014. Muslim Holy Days are helpful to isolating the effect of faith and decoupling it from possible contaminants. This study has tried to isolate the impact of Muslim Holy days from Gregorian calendar anomalies. First, we check the impact of Holy days on stock returns of Asian and African markets together, then the impact of stock returns of Asian and African markets separately. We divide our data into two sub groups i.e. on the basis of income and population. On the basis of income, we check the impact of Holy days on stock returns of high income, upper middle income and lower income markets separately. Similarly on the basis of population, the impact of Holy days on stock return of high populated and less populated markets. Pooled fixed/variable effect regression is used to investigate the impact of Muslim Holy days on stock return. Hausman test is used to check, which effect either fixed or random is suitable for our data. The study found that Muslim Holy days are effecting stock returns of under study markets differently. This effect of Muslim Holy days on stock returns is not unidirectional as Ramadan, Eid-ul-Fitr and Eid-ul-Adha yield a positive impact on stock return, while Ashoura and Eid Melad-un-Nabi (SAW) are associated with negative one. These findings strengthen our argument that the documented effect is a result of Muslim Holy days, not due to Gregorian calendar anomalies. This study also opposed to traditional financial philosophy (EMH) that distribution of stock return should remain same across all trading days of the year (Fama, 1970, Jaffe, Rozeff & Kinney, 1976 & Westerfield, 1985). Even by isolating and controlling the effect of Muslim Holy days from Gregorian calendar anomalies, the Gregorian calendar effect still exist in all under studies markets. On the basis of these findings, we suggest that investors can formulate investment strategy and select a trading time in order to outperform the market.
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    Temperature Anomaly: Evidence from South Asian Countries
    (Library Information Services COMSATS University Islamabad Lahore Campus, 2017) ARSLAN SHAUKAT (FA15-RMS-009); Dr. Mian Sajid Nazir; LHR TP 4852
    This study inspects the relationship between extreme temperature and stock returns. Efficient market hypothesis proposed that investors are rational and stock prices represent all information so it is not possible to manipulate the market and earn abnormal returns. On the other hand, it has been observed that stock markets deviate (anomalies) and contradicts the rule of EMH. Among other anomalies, Temperature anomaly is said to have psychological impact on investor’s moods and emotions which in turn shape their investing behaviors. Studies of human moods and psychology has found that lower temperature can result in aggression whereas high temperature can lead a human to both aggression and apathy (Cao & Wei, 2005). Using GARCH methodology, the study will incorporate daily financial and temperature data from two South Asian cities and their respective stock exchanges, named as: Pakistan Stock Exchange situated at Karachi, Bombay Stock Exchange based at Mumbai. This comparative study is an effort to find the answer of whether temperature anomaly has an effect on the Stock returns based at the financial markets of South Asian countries.