View
215
Download
1
Embed Size (px)
Citation preview
Market AnomaliesMarket Anomalies
Seang Oudom 11761Seang Oudom 11761
Ong Wei Han 10967Ong Wei Han 10967
Bahariah Latan 10631Bahariah Latan 10631
Chow Cheah Hui 10638Chow Cheah Hui 10638
Do Thi Mai Chi 10546Do Thi Mai Chi 10546
Market AnomaliesMarket Anomalies
In financial markets, anomalies refer In financial markets, anomalies refer to situations when a security or to situations when a security or group of securities performs contrary group of securities performs contrary to the notion of efficient markets, to the notion of efficient markets, where security prices are said to where security prices are said to reflect all available information at reflect all available information at any point in time.any point in time.
The Islamic Calendar Effect in The Islamic Calendar Effect in Karachi Stock MarketKarachi Stock Market
Written by Khalid Mustafa, Assistant Written by Khalid Mustafa, Assistant Professor, Department of Economics, Professor, Department of Economics, University of KarachiUniversity of Karachi
Used conditional and unconditional Used conditional and unconditional riskrisk
Four major points : review of Four major points : review of literature, econometric methodology, literature, econometric methodology, data, empirical findings data, empirical findings
Months of Islamic Calendar Months of Islamic Calendar ObservedObserved
SyaabanSyaaban RamadhanRamadhan SyawalSyawal ZulkaedahZulkaedah ZulhijjahZulhijjah MuharramMuharram
Review of LiteratureReview of Literature
Little attention givenLittle attention given Alper and Aruoba (2001) analyze Alper and Aruoba (2001) analyze
various macroeconomic variables in various macroeconomic variables in TurkeyTurkey
Seasonal adjustment procedures Seasonal adjustment procedures based on fixed holidays often failedbased on fixed holidays often failed
Econometric MethodologyEconometric Methodology
Methodology of Ariel (1987), Methodology of Ariel (1987), Lakonishok and Smidt (1988), Jaffe Lakonishok and Smidt (1988), Jaffe and Westerfield (1989) usedand Westerfield (1989) used
Mathematical equations usedMathematical equations used
DataData
Daily covered from March 1998 to Daily covered from March 1998 to September 2004September 2004
Daily Business RecorderDaily Business Recorder Return is calculated by the difference Return is calculated by the difference
of two successive log stock pricesof two successive log stock prices
Empirical FindingsEmpirical Findings
Average return is smaller and Average return is smaller and insignificant during Ramadhaninsignificant during Ramadhan
Positive and significant average Positive and significant average return is found in the month of return is found in the month of Syawal and ZulkaedahSyawal and Zulkaedah
Small Sized AnomalySmall Sized Anomaly
What is small sized anomaly?What is small sized anomaly? Let's look at this scenarioLet's look at this scenario
Big companies – earn a lot money, Big companies – earn a lot money, stable, high qualitystable, high quality
Small companies – unknown, Small companies – unknown, unreliable, earn very few money, poorunreliable, earn very few money, poor
Q :Invest in big companies or small Q :Invest in big companies or small companies?companies?
One example of getting rich!!One example of getting rich!! You invest in 10 companiesYou invest in 10 companies Share price of all 10 companies is 1 centShare price of all 10 companies is 1 cent You buy 100,000 units for all 10 companies. You buy 100,000 units for all 10 companies. For each company: 100000*RM0.01 = For each company: 100000*RM0.01 =
RM1000RM1000 Total investment: RM1000*10 = RM10,000Total investment: RM1000*10 = RM10,000 Unlucky event: Share price of 9 companies Unlucky event: Share price of 9 companies
fallfall Lucky event: Share price of the 10Lucky event: Share price of the 10thth
company increases to RM1.00 per unit company increases to RM1.00 per unit shareshare
Result: RM1.00 * 100000 = RM100000Result: RM1.00 * 100000 = RM100000
• Unstable – not consistent over the yearsUnstable – not consistent over the years• Argument – some people deny the anomalyArgument – some people deny the anomaly
Superstitious Market Superstitious Market Indicators:Indicators:
The Super Bowl IndicatorThe Super Bowl Indicator
It is some nonmarket signals that It is some nonmarket signals that some people believe will accurately some people believe will accurately indicate the direction of the market. indicate the direction of the market.
The Super Bowl indicator has correctly The Super Bowl indicator has correctly predicted the direction of the Dow predicted the direction of the Dow Jones Industrial Average in 33 of the Jones Industrial Average in 33 of the 42 years the game has been played. 42 years the game has been played.
Between 1967 and 1997, the indicator Between 1967 and 1997, the indicator was correct 28 out of 31 times – a 90% was correct 28 out of 31 times – a 90% success rate. success rate.
Success rate dropped from 80% to Success rate dropped from 80% to 79% last year . 79% last year .
The Super Bowl IndicatorThe Super Bowl Indicator
how it works?how it works?
When an “original” National Football When an “original” National Football League team wins the big game, the League team wins the big game, the market rises for that year.market rises for that year.
but it falls when the winner is a team but it falls when the winner is a team that joined the National Football that joined the National Football League because of the league’s League because of the league’s merger with the American Football merger with the American Football League in 1970. League in 1970.
When the indicator was When the indicator was wrongwrong
In 2008, the victorious New York In 2008, the victorious New York Giants, which joined the NFL in 1925, Giants, which joined the NFL in 1925, defeated the favorite New England defeated the favorite New England Patriots, an indication that the Patriots, an indication that the market would rise. market would rise.
However, the market did not rise.However, the market did not rise.
When the indicator was When the indicator was rightright
In both 2006 and 2007, the two In both 2006 and 2007, the two teams vying for the Lombardi Trophy teams vying for the Lombardi Trophy both had their roots in the original both had their roots in the original NFL. In theory, the market would rise NFL. In theory, the market would rise no matter who won, and in both no matter who won, and in both years, it did.years, it did.
Announcement AnomaliesAnnouncement Anomalies
Stock Split Effect: Stock Split Effect: before and after a before and after a company announces a stock split, the stock company announces a stock split, the stock price normally rises.price normally rises.
Short-Term Price Drift: Short-Term Price Drift: stock prices react and stock prices react and often continue to move in the same directionoften continue to move in the same direction
Merger Arbitrage: Merger Arbitrage: the value of the company the value of the company being acquired tends to rise while the value being acquired tends to rise while the value of the bidding firm tends to fallof the bidding firm tends to fall
Superlattice Power Inc.Superlattice Power Inc. Superlattice Power Inc. engages in Superlattice Power Inc. engages in
developing rechargeable lithium ion developing rechargeable lithium ion batteries for power production in the batteries for power production in the United States. It develops United States. It develops rechargeable battery system for rechargeable battery system for various applications ranging from various applications ranging from portable electronics to onboard portable electronics to onboard energy storage in electronic vehicles. energy storage in electronic vehicles.
Superlattice Power, Inc. (OTCBB: SLAT) 3-Superlattice Power, Inc. (OTCBB: SLAT) 3-for-1 Forward Stock Split for Record for-1 Forward Stock Split for Record Date to Be Effective 12 October-09, or Date to Be Effective 12 October-09, or Such Later Effective Date Approved by Such Later Effective Date Approved by FINRAFINRA
LAS VEGAS, NV, Sep. 18, 2009 LAS VEGAS, NV, Sep. 18, 2009 http://www.investorpoint.comhttp://www.investorpoint.com
OTCBB: over the counter bulletin boardOTCBB: over the counter bulletin board
FINRA: FINRA: Financial Industry Regulatory Authority Financial Industry Regulatory Authority
Announcement AnomaliesAnnouncement AnomaliesSuperlattice Power, IncSuperlattice Power, Inc
From Wall SteetFrom Wall Steet
www.transwordwww.transword
Undervalued Stock Superlattice Power Undervalued Stock Superlattice Power Inc. (OTCBB: SLAT) Highlighted on Inc. (OTCBB: SLAT) Highlighted on Undervalued Penny Stocks list to Undervalued Penny Stocks list to Watch by Wall Street Grand Watch by Wall Street Grand
LAS VEGAS, NV, Sep. 18, 2009 LAS VEGAS, NV, Sep. 18, 2009
Superlattice Power, Inc
http://www.investorpoint.comhttp://www.investorpoint.com
Superlattice Power, Inc. 3-for-1 Superlattice Power, Inc. 3-for-1 Forward Stock Split Will Be Forward Stock Split Will Be Effective Opening of Business Effective Opening of Business Monday October 19, 2009Monday October 19, 2009
Oct. 16, 2009 (GlobeNewswire) Oct. 16, 2009 (GlobeNewswire)
CALENDAR EFFECTCALENDAR EFFECT
Presented by Do Thi Mai Chi Presented by Do Thi Mai Chi
What is Calendar effect?What is Calendar effect?
Stock returns are cyclicalStock returns are cyclical
Popular types:Popular types:• Weekend effectWeekend effect• Turn-of-the-month effectTurn-of-the-month effect• Turn-of-the-year effectTurn-of-the-year effect• January barometerJanuary barometer
Weekend effectWeekend effect
Monday effect / day-of-the-week effectMonday effect / day-of-the-week effect Perspectives:Perspectives:
• Stock returns: negative from Friday to MondayStock returns: negative from Friday to Monday• Monday returns: lower than FridayMonday returns: lower than Friday
Researches:Researches:• Osborne (1962) and Cross (1973): S&P 500 Osborne (1962) and Cross (1973): S&P 500
Index:Index: Friday returns > the averageFriday returns > the average Monday returns < the average.Monday returns < the average.
• by Gibbons and Hess (1981): for 30 stocks from by Gibbons and Hess (1981): for 30 stocks from DJIA Index:DJIA Index:
returns were negative on Mondaysreturns were negative on Mondays
US stock marketUS stock market
International stock market
Weekend effect in Bursa MalaysiaWeekend effect in Bursa Malaysia( a study by Universiti Malaysia Sabah)
KLCI data in:•Pre-crisis period: 2 December 1993 – 31 May 1997 •Crisis: 1 June 1997 – 30 January 1998 (Asian financial crisis)•Post-crisis: 1 February 1998 – 10 October 2005
Turn-of-the-month effectTurn-of-the-month effect
Stock prices - larger on the last day Stock prices - larger on the last day of each month & the first 3 days of of each month & the first 3 days of the month later. the month later.
initially identified by Lakonishok and initially identified by Lakonishok and Smidt (1988) by using data series of Smidt (1988) by using data series of DJIA Index in the period 1897-1986DJIA Index in the period 1897-1986
Research Research by John J. McConnell and Wei Xu by John J. McConnell and Wei Xu from Purdue Universityfrom Purdue University
Turn-of-the-year effectTurn-of-the-year effect
January effectJanuary effect returns - higher at the end of returns - higher at the end of
December & for the first few days of December & for the first few days of January, especially for small-cap January, especially for small-cap stocksstocks
Research by Jeffrey A. Hirsch Research by Jeffrey A. Hirsch
January BarometerJanuary Barometer
““as January as January goes, so goes goes, so goes the year” - Yale the year” - Yale Hirsch, the Hirsch, the founder of the founder of the annual Stock annual Stock Trader’s Trader’s AlmanacAlmanac
Src: CNNMoney.com
CNNMoney:CNNMoney:Worst January ever for Dow, Worst January ever for Dow, S&P 500 – 30/01/2009S&P 500 – 30/01/2009
January returns in S&P 500 of -4.6%January returns in S&P 500 of -4.6%
Bloomberg InsightBloomberg Insight