MARKET EFFICIENCY AND TIMING ANOMALIES: EVIDENCE FROM REAL ESTATE MARKETS
LOH CHIEW HUI
LOH CHIEW HUI
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Abstract
The validity of the Efficient Market Hypothesis has all along been a much debated issue in the capital investment market. Inefficiencies in the market can allow the prediction of price movements and stock performances, thus leading to opportunities of making abnormal profits. One type of market inefficiency is known as timing anomalies. These refer to abnormal returns in stocks during specific trading days or during certain months. Knowledge of such anomalies will allow investors to aptly alter their trading strategies in accordance to stock behaviour witnessed in the timing anomalies so as to fully maximize profits and minimize losses.
With the development of indirect real estate investment vehicles and the convergence of the real estate and equity market, listed property stocks and real estate investment trusts are now part of the capital market. If timing anomalies are proven to be present in these instruments, real estate investors will be able to take advantage of them. This study examines the presence of these anomalies in the Singapore and Australian context. The results indicate that the Day-of-the-Week effect, the Turn-of-the-Month effect and the Pre-Holiday effect exist mainly in Singapore property stocks and their existence is linked to the size of the stocks. The findings are done using both parametric and non-parametric tests. Resultant implications and strategies are suggested by these findings. Lastly, the Ghost Month effect does not seem to exist in the Singapore property-related stocks.
It can be concluded that there is evidence from the real estate market that market inefficiencies in the form of timing anomalies exist. Investors, especially retail investors interested in investing in real estate, are likely to gain by altering their trading patterns in accordance to the findings.
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2005
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