265-322-1-RV - SEMDEX RETURNS: IS THERE A NON-TRADING...

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SEMDEX RETURNS: IS THERE A NON-TRADING PERIOD EFFECT? Author’s Name: Mr Ushad Agathee Subadar Affiliation: University of Mauritius Mailing Address: Finance and Accounting department, Faculty Law and Management, Reduit, Mauritius. Email address: u.subadar@uom.ac.mu Author’s Name: Mr Mathew Lamport Affiliation: University of Mauritius Mailing Address: Finance and Accounting department, Faculty Law and Management, Reduit, Mauritius. Email address: m.lamport@uom.ac.mu
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SEMDEX RETURNS: IS THERE A NON-TRADING PERIOD EFFECT? Abstract This paper investigates the effects of any non-trading period over the weekend on stock market returns on the Stock Exchange of Mauritius. Using daily observation from the SEMDEX for the period 1998 to 2006, the descriptive statistics reveal that lower average Monday and higher average Friday returns though the returns between the two days are statistically insignificant for most of the time periods. Finally, regression results based on yearly analysis as well as for the whole sample period suggest that returns may not be affected by the non-trading period during the weekend, reinforcing the claim of Efficient Market hypothesis.
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1.0 Introduction Based on the studies of French (1980), Schwert (1990), and Keim and Stambaugh (1984), returns over the weekend tend to be negative relative to other trading days. Essentially, according to Aggarwal and Tandon (1994) and Mills and Coutts (1995), mean stock returns are unusually high on Fridays and low on Mondays. In deed, the non-trading period over the weekend seems to suggest that investors behave differently on Fridays and Mondays. There are different explanations over the characteristics of Monday and Friday returns. For instance, Fortune (1991) suggested that companies and governments make public good news on weekdays when market are open and when it is readily absorbed, and announce bad news mainly after the close on Friday as investors cannot react until the Monday opening. Based on Gibbons and Hess (1981), there may be possible biases on Friday prices such that errors for low Monday returns could be offset by upward biases in Friday. Essentially, there has not been so far any formal attempt to examine the effects of non trading period over the weekend on the Stock Exchange of Mauritius (SEM). In this respect, the main objective of this paper is to initially test whether or not returns on Mondays and Fridays exhibit properties as described by the prior literature and thereafter to examine whether there is a negative weekend effect on the SEM. This paper is organised as follows; Section 2 considers previous academic literature, Section 3 provides an overview of the SEM, the research methodology is examined in section 4, Section 5 looks at the analysis of results while section 6 concludes the paper. 2.0 Prior Research
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265-322-1-RV - SEMDEX RETURNS: IS THERE A NON-TRADING...

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