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An Anatomy of Calendar Effects

Last Updated on 10 February, 2024 by Rejaul Karim

Delving into the intricate world of market calendar effects, Laurens Swinkels and Pim van Vliet present a comprehensive exploration in their work, “An Anatomy of Calendar Effects,” featured in the Journal of Asset Management. This study scrutinizes the interplay among five prominent calendar effects: the Halloween effect, January effect, turn-of-the-month effect, weekend effect, and holiday effect.

Revealing compelling insights, the research identifies Halloween and turn-of-the-month as the dominant forces, overpowering the remaining effects. Notably, the equity premium from 1963 to 2008 is a substantial 7.2% when influenced by Halloween or turn-of-the-month, sharply contrasting the -2.8% figure in their absence.

Robust across various dimensions, this empirical investigation refines the calendar effects landscape, distilling it from five to two key phenomena, offering a more potent and perplexing perspective on seasonal market dynamics.

Abstract Of Paper

This paper studies the interaction of the five most well-established calendar effects: the Halloween effect, January effect, turn-of-the-month effect, weekend effect and holiday effect. We find that Halloween and turn-of-the month (TOM) are the strongest effects fully diminishing the other three effects to zero. The equity premium over the sample 1963-2008 is 7.2% if there is a Halloween or TOM effect, and -2.8% in all other cases. These findings are robust with respect to transactions costs, across different samples, market segments, and international stock markets. Our empirical research narrows down the number of calendar effects from five to two, leading to a more powerful and puzzling summary of seasonal effects.

Original paper – Download PDF

Here you can download the PDF and original paper of An Anatomy of Calendar Effects.

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Author

Laurens Swinkels
Erasmus University Rotterdam (EUR); Robeco Asset Management

Pim van Vliet
Robeco Quantitative Investments

Conclusion

Concluding this exploration into calendar effects, the study delved into five prominent phenomena—Halloween, January, turn-of-the-month (TOM), weekend, and holiday effects. Notably, Halloween and TOM emerged as robust forces, eclipsing the others entirely.

The equity premium during 1963-2008 witnessed a remarkable 7.2% upswing in the presence of Halloween or TOM effects, sharply contrasting with a -2.8% downturn in their absence. The findings exhibited resilience across challenges such as transaction costs, diverse samples, market segments, and global stock markets.

By distilling the myriad calendar effects to the dominance of Halloween and TOM, the empirical investigation delivers a potent and perplexing narrative, unraveling the intricate tapestry of seasonal patterns in financial markets.

Related Reading:

Calendar Anomalies in Stock Index Futures

The Piotroski F Score in the Australian Market: Performance & Fundamental Drivers

FAQ

Q1: What are the key calendar effects explored in the study, and which two effects emerge as dominant forces in shaping market dynamics?
A1: The study scrutinizes five prominent calendar effects: the Halloween effect, January effect, turn-of-the-month effect, weekend effect, and holiday effect. Among these, Halloween and turn-of-the-month (TOM) emerge as the dominant forces, overpowering the other three effects entirely.

Q2: How does the equity premium vary based on the presence of Halloween or turn-of-the-month effects, and what contrasts are observed when these effects are absent?
A2: The equity premium during the period 1963-2008 exhibits a substantial 7.2% upswing in the presence of Halloween or turn-of-the-month effects. In contrast, in the absence of these effects, the equity premium sharply declines to -2.8%. This stark contrast highlights the significant impact of Halloween and turn-of-the-month on market returns.

Q3: Are the findings of the study robust, and how does the empirical research contribute to refining our understanding of calendar effects in financial markets?
A3: Yes, the findings are robust across various dimensions, including transaction costs, different samples, market segments, and international stock markets. The empirical research refines our understanding by distilling the myriad calendar effects into two dominant phenomena, Halloween and turn-of-the-month, offering a more powerful and perplexing perspective on seasonal market dynamics.

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