Risk-Adjusted Seasonality in Muslim Frontier Stock Markets
2021
We
investigate the evidence of three risk-adjusted calendar anomalies in eight frontier
markets.
Our sample consists of the daily closing prices of their stock indices
for the period of January 2006 to September 2019. We categorize the data with
respect to day-of-the-week, Lunar calendar and Islamic calendar. Using Morgan
Stanley Capital International (MSCI) eight Markets Index as our proxy of the
market portfolio, most of the frontier markets tested exhibit calendar
seasonality. We confirm that systematic risk varies with respect to
day-of-the-week, Lunar months and Islamic months. After consideration of
time-varying risk and applying Bonferroni correction, few frontier markets
exhibit profitable investment opportunities from calendar return anomalies for
active investment managers. This study contributes to the existing literature
by documenting evidence of the presence of both day-of-the-week and
month-of-the-year return seasonality both for the Gregorian and Islamic
calendar for frontier markets.
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