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Day of the Week Effect in Central European Stock Markets


Finance

Day of the Week Effect in Central European Stock Markets

Name and surname of author:

Daniel Stavárek, Tomáš Heryán

Year:
2012
Volume:
15
Issue:
4
Keywords:
day-of-the-week effect, calendar anomalies, stock market, GARCH-M model, financial crisis.
DOI (& full text):
Anotation:
The aim of the paper is to estimate the day of the week effect in the stock markets in the Czech Republic, Hungary and Poland over the period 2006–2012. The paper fills the gap in literature as the…more
The aim of the paper is to estimate the day of the week effect in the stock markets in the Czech Republic, Hungary and Poland over the period 2006–2012. The paper fills the gap in literature as the most recent period and the countries covered by the present paper have not been studied yet. The entire period of estimation is divided to six sub-periods capturing individual phases of the financial and economic crisis. We separately estimate a modified GARCH-M (1,1) model for each country and each sub-period using daily returns of the major national stock market indices. Although the markets share the main development trends the reactions of markets to domestic and international shocks differ remarkably. The day of the week effect is measured for both daily returns and conditional variance (volatility) of the returns. The results clearly indicate that there is a little evidence of day of the week effect. Daily calendar anomalies are rather sporadic, isolated, unstable over time and often opposite to theoretical assumptions. While some occurrences of the day of the week effect were revealed in the Czech Republic and Poland, Hungary is almost completely free of anomalies. There is no phase of financial crisis characteristic of significantly increased incidence of day of the week effects. However, only stage with no day effect in returns was the pre-crisis period. We conclude that the day of the week effect is not typical for the Central European stock markets and the recent financial crisis seems to have no impact on existence of this phenomenon in the markets.
Section:
Finance

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