STOCK MARKET ANOMALIES. EMPIRICAL EVIDENCES IN FOUR EUROPEAN COUNTRIES

One of the most important principles used in measuring the market's efficiency is the ability of prices to reflect all available information. The Efficient Market Hypothesis (EMH) is the proposition that current stock prices reflect all available information about the value of the firm (Fama, 1965) and that there is no way to earn excess profits by using this information. However, evidence against the EMH is growing. Scholars have been studying the calendar anomalies that are one of the characteristics of financial markets, and these anomalies are found to contradict the EMH. This paper examines day of the week and month of the year effects in four European stock market indexes in the period 1998-2007. Recognizing that returns are non-normally distributed, auto correlated and that the residuals of linear regressions are variant over time, I use statically robust estimation methodologies, including bootstrapping and GARCH modelling. Although returns tend to be lower in the months of August and September, I do not find strong evidence of across-the-board calendar effects, as the most favourable evidence is only country-specific. Additionally, using rolling windows regressions, I find that the stronger country-specific calendar effects are not stable over the whole sample period, casting additional doubt on the economic significance of calendar effects.