DO SEASONAL ANOMALIES STILL EXIST IN CENTRAL AND EASTERN EUROPEAN COUNTRIES? A CONDITIONAL VARIANCE APPROACH

Given the Efficient Market Hypothesis (EMH), the aim of this paper is to investigate three seasonal anomalies, both in return and volatility – that is, the day-of-the-week effect, the week-of-the-month effect, and the month-of-the effect, respectively, for a sample of 11 countries from Central and Eastern Europe area from 2000 to 2015 by employing a conditional variance approach. Our results show that the EMH does not hold for all the markets we have surveyed. Moreover, the seasonal effects are also present in the volatility equations. Therefore, these markets are not efficient, giving rise to arbitrage opportunities. Hence, the investors may take advantage of these anomalies by designing profitable trading strategies which account for transaction costs and make abnormal returns.