Abstract
This study revisits calendar anomalies in Japanese stock returns to examine whether they can be explained by market conditions. Results of the OLS and GARCH (1,1) regression models show that most of the well-known calendar anomalies no longer exist in Japanese stock returns when conventional methodologies are used. These calendar anomalies became evident during the Japanese bubble period and disappeared subsequently. To provide new evidence on calendar anomalies in Japanese stock returns, we examine calendar anomalies based on market conditions. We show that the day-of-the-week, January, turn-of-the-month, Halloween and Dekansho-bushi effects became evident in UP market conditions only. They were never evident in DOWN market conditions. All these anomalies are still found to be significant in UP market conditions. Our explanation is consistent throughout the whole sample period and is robust against the choice of index used to measure market returns.
Similar content being viewed by others
References
Agrawal, A., & Tandon, K. (1994). Anomalies or illusion? Evidence from stock markets in eighteen countries. Journal of International Money and Finance, 13(1), 83–106.
Andrade, S. C., Chhaochharia, V., & Fuerst, M. (2013). “Sell in May and go away” just won’t go away. Financial Analysts Journal, 69(4), 94–105.
Ariel, R. A. (1987). A monthly effect in stock returns. Journal of Financial Economics, 18(1), 161–174.
Berges, A., McConnel, J. J., & Schlarbaum, G. G. (1984). The turn-of-the-year in Canada. The Journal of Finance, 39, 185–192.
Berument, H., & Kiymaz, H. (2001). The day of the week effect on stock market volatility. Journal of Economics and Finance, 25, 181–193.
Bollerslev, T. (1986). Generalized autoregressive conditional heteroscedasticity. Journal of Econometrics, 31(3), 307–327.
Booth, D. G., & Keim, D. B. (2000). Is there still a January effect? In D. B. Keim & W. T. Ziemba (Eds.), Security market imperfections in worldwide equity returns (pp. 169–178). Cambridge: Cambridge University Press.
Bouman, S., & Jacobsen, B. (2002). The Halloween indicator, “sell in May and go away”: Another puzzle. The American Economic Review, 92(5), 1618–1635.
Cadsby, C. B., & Ratner, M. (1992). Turn-of-the month and pre-holiday effects on stock returns: Some international evidence. Journal of Banking and Finance, 16, 497–509.
Choudhury, T. (1996). Stock markets volatility and the crash of 1987: Evidence from six emerging markets. Journal of International Money and Finance, 15(6), 969–981.
Cooper, M. J., Gutierrez, R. C., Jr., & Hameed, A. (2004). Market states and momentum. The Journal of Finance, 59, 1345–1365.
Cross, F. (1973). The behavior of stock prices on Fridays and Mondays. Financial Analysts Journal, 29(6), 67–69.
Daniel, K., & Titman, S. (2000). Market inefficiency in an irrational World. NBER Working Paper No. 7489, National Bureau of Economic Research.
Doyle, J. R., & Chen, C. H. (2009). The wandering weekday effect in major stock markets. Journal of Banking and Finance, 33, 1088–1399.
Engle, R. F. (1982). Autoregressive conditional heteroskedasticity with estimates of the variance of United Kingdom inflation. Econometrica, 50(4), 987–1007.
Fama, E. F. (1965). The behavior of stock market prices. The Journal of Business, 38(1), 34–105.
Fama, E. F. (1970). Efficient capital market: A review of theory and empirical work. Journal of Finance, 25(2), 383–417.
Fama, E. (1998). Market efficiency, long-term return, and behavioral finance. Journal of Financial Economics, 49(3), 238–306.
French, K. R. (1980). Stock returns and the weekend effect. Journal of Financial Economics, 8(1), 55–69.
Gervais, S., & Odean, T. (2001). Learning to be overconfident. Review of Financial Studies, 14, 1–27.
Gregoriou, A., Kontonikas, A., & Tsitsianis, N. (2004). Does the day of the week effect exist once transaction costs have been accounted for? Evidence from the UK. Applied Financial Economics, 14(3), 215–220.
Gu, A. Y. (2003). The declining January effect: Experience of five G7 countries. The International Journal of Finance, 15(1), 2465–2475.
Gultekin, M., & Gultekin, N. B. (1983). Stock market seasonality: International evidence. Journal of Financial Economics, 12(4), 469–481.
Hanauer, M. (2014). Is Japan different? Evidence on momentum and market dynamics. International Review of Finance, 14(1), 141–160.
Hawawini, G., & Keim, D. B. (1995). On the predictability of common stock returns: World-wide evidence. In R. Jarrow, et al. (Eds.), Handbooks on OR & MS (Vol. 9, pp. 497–544). Amsterdam: Elsevier Science.
Hui, T. (2005). Day of the week effect in US and Asia-Pacific stock markets during the Asian financial crisis: A non-parametric approach. The International Journal of Management Science, 33, 277–282.
Jacobsen, B., & Zhang, C. Y. (2014). The Halloween indicator, “sell in May and go away”. An Even Bigger Puzzle. https://doi.org/10.2139/ssrn.2154873.
Jaffe, J. F., & Westerfield, R. (1985a). Patterns in Japanese common stock returns: Day of the week and turn of the year effects. The Journal of Financial of Financial and Quantitative Analysis, 20(2), 261–272.
Jaffe, J. F., & Westerfield, R. (1985b). The weekend effect in common stock returns: The international evidence. The Journal of Finance, 40(2), 433–454.
Jaffe, J. F., & Westerfield, R. (1989). Is there a monthly effect in stock market returns? Evidence from foreign countries. Journal of Banking and Finance, 13, 237–244.
Jaffe, J. F., Westerfield, R., & Christopher, M. A. (1989). A twist on the Monday effect in stock prices: Evidence from the U.S. and foreign stock markets. Journal of Banking and Finance, 13, 641–650.
Kato, K. (1990). Weekly patterns in Japanese stock returns. Management Science, 36(9), 1031–1043.
Kato, K., & Schallheim, J. S. (1985). Seasonal and size anomalies in the Japanese stock market. The Journal of Financial and Quantitative Analysis, 20, 107–118.
Kayacetin, V., & Lekpek, S. (2016). Turn-of-the-month effect: New evidence from an emerging market. Finance Research Letters, 18, 142–157.
Keim, D. B. (1983). Size-related anomalies and stock return seasonality: Further empirical evidence. Journal of Financial Economics, 12(1), 13–32.
Khan, M. S. R. (2016). Market conditions and momentum in Japanese stock returns. Journal of Behavioral Economics and Finance, 9, 30–41.
Kohers, G., Kohers, N., Pandey, V., & Kohers, T. (2004). The disappearing day-of-the-week effect in the world’s largest equity markets. Applied Economics Letters, 11(3), 167–171.
Kunkel, R. A., Compton, W. S., & Beyer, S. (2003). The turn-of–the-month effect still lives: The international evidence. International Review of Financial Analysis, 12, 207–221.
Lakonishok, J., & Smidt, S. (1988). Are seasonal anomalies real? A ninety-year perspective. The Review of Financial Studies, 1(4), 403–425.
Maberly, E. D., & Pierce, R. (2003). The Halloween effect and Japanese equity prices: Myth or exploitable anomaly. Asia-Pacific Financial Markets, 10, 319–334.
Maberly, E. D., & Pierce, R. (2004). Stock market efficiency withstands another challenge: Solving the “sell in May/buy after Halloween” puzzle. Econ Journal Watch, 1(1), 29–46.
Marquering W. (2002). Seasonal patterns of stock market returns. Unpublished manuscript, Rotterdam: Erasmus University.
McConnel, J. J., & Xu, W. (2008). Equity returns at the turn of the month. Financial Analysts Journal, 64(2), 49–64.
Penman, S. H. (1987). The distribution of earnings news over time and seasonalities in aggregate stock returns. Journal of Financial Economics, 18, 199–228.
Reyes, M. G. (2001). Asymmetric volatility spillover in the Tokyo stock exchange. Journal of Economics and Finance, 25(2), 206–213.
Sakakibara, S., Yamasaki, T., & Okada, K. (2013). The calendar structure of the Japanese stock market: The “sell in May effect” versus the “Dekansho-bushi effect”. International Review of Finance, 13(2), 161–185.
Schwert, G. W. (2003). Anomalies and market efficiency. In G. Constantinides, M. Harris, & M. Stulz (Eds.), Handbook of the economics of finance (pp. 937–972). Amsterdam: North-Holland.
Szakmary, A. C., & Kiefer, D. B. (2004). The disappearing January/turn of the year effect: Evidence from stock index futures and cash markets. The Journal of Futures Market, 24(8), 755–784.
Zeimba, W. T. (1991). Japanese security market regularities: Monthly, turn-of-the-month and year, holiday, and golden week effects. Japan and the World Economy, 3(2), 119–146.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Khan, M.S.R., Rabbani, N. Market Conditions and Calendar Anomalies in Japanese Stock Returns. Asia-Pac Financ Markets 26, 187–209 (2019). https://doi.org/10.1007/s10690-018-9263-4
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10690-018-9263-4
Keywords
- Calendar anomalies
- Day of the week effect
- Dekansho-bushi effect
- Halloween effect
- January effect
- Turn of the month effect