REVISITING CALENDAR ANOMALIES IN THE SINGAPORE STOCK MARKETS

Abstract

This thesis examines the well-known calendar anomalies in the Singapore equity market. The seven anomalies studied are the January effect, day of the week effect, turn of the month effect, turn of the year effect, preholiday effect, post-holiday effect and the other January effect. Our findings indicate that six of the calendar anomalies are present in the overall period. There is no evidence of the other January effect in the Singapore stock market. Instead, we find the other July effect. However, when the results are separated into three sub-periods, there is evidence that only the turn of the month effect and post-holiday effect exist in the third sub-period. The other calendar anomalies have weakened to the point where they no longer exist. This may be attributed to increased market efficiency. The existence of the January effect for the overall period provides evidence that some non-tax influence exists for January effect as capital gains from stocks are generally non-taxable for individuals in Singapore. A correlation test shows that Singapore market is significantly correlated with the U.S. market. Thus, one plausible explanation for the day of the week effect is that it is a manifestation of the U.S. day of the week effect. For the turn of the month effect, there is no clear reason why the days before the turn of the month are higher than the days after the turn of the month. It is also not clear why the sixth day before the turn of the month experiences significantly lower return than the other days. For the holiday effect, it may be attributed to the good mood of the investors just before the holiday. The existence of calendar anomalies allows an investor to time his trade better. However, it will be challenging to devise a stand-alone strategy because o f transaction cost considerations.