Ushad Subadar Agathee

Ushad Subadar Agathee - 2008 Oxford Business &Economics...

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ISBN : 978-0-9742114-7-3 TITLE PAGE: TITLE: MONTHLY ANOMALIES ON THE MAURITIAN EQUITY MARKET: EVIDENCE FROM GARCH MODELS AUTHOR’S NAME: Mr USHAD SUBADAR AGATHEE PHONE NUMBER: +230 4541041 AFFILIATION: DEPARTMENT OF FINANCE AND ACCOUNTING, FACULTY LAW AND MANAGEMENT, UNIVERSITY OF MAURITIUS. EMAIL: u.subadar@uom.ac.mu June 22-24, 2008 Oxford, UK 1
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ISBN : 978-0-9742114-7-3 Monthly Anomalies on the Mauritian Equity Market: Evidence from GARCH models Abstract This paper essentially aims at examining the monthly anomalies on the Stock Exchange of Mauritius (SEM). Daily observations from the SEMDEX for the period July 1989 to December 2006 are used for the study. As a matter of fact, the implication of this study can help towards the investment strategies developed to earn excess return on the SEM if the monthly anomalies are present. The descriptive statistics also suggest the presence of January and July effect. One plausible explanation for the July effect relates to the fiscal incentives made available to local stock market investors. Based on the standard GARCH model, the T- GARCH model and the E-GARCH model, evidence of monthly effect is found, suggesting investors to consider the seasonal effects when investing on the SEM. Finally, the results from the T-GARCH model suggest the presence of a leverage effect on the SEM. Keywords: Month of the year effects; Stock market anomalies; African Emerging Stock markets; Efficient market hypothesis; SEMDEX June 22-24, 2008 Oxford, UK 2
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ISBN : 978-0-9742114-7-3 1.0 Introduction Over the last three decades, there have been a number of studies i considering calendar anomalies on major developed and emerging markets. Major anomalies relate to the day of the week and the month of the year effect. This paper concentrates on the second anomaly. Essentially, the monthly anomalies would relate to the returns being higher on certain specific months. Undoubtedly, this is in sharp contradiction with the Efficient Market hypothesis as prices should be random and not be predictable based on certain months. A significant finding of most empirical research ii is the January effect where returns are abnormally higher relative to other months. Main reasons suggested relate to the tax-loss selling argument iii where investors sell shares on certain months to minimize their tax liability. There is also the information release hypothesis iv where news are released on specific dates or months such that this affect the trading behaviour of investors. In the past decade, the SEM have experience major developments in terms of market size, trading volume, number of listed companies and contribution to the Mauritian GDP. However, published research has been so far very limited on monthly anomalies. To my
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Ushad Subadar Agathee - 2008 Oxford Business &Economics...

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