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Modern Management Review (dawna nazwa: Zarządzanie i Marketing)

Modern Management Review
(dawna nazwa: Zarządzanie i Marketing)
22 (1/2015), DOI: 10.7862/rz.2015.mmr.2

ANALYSIS OF MONTHLY RATES OF RETURN IN JANUARY AND DECEMBER ON THE EXAMPLE OF SELECTED WORLD STOCK EXCHANGE INDEXES

Krzysztof BOROWSKI

DOI: 10.7862/rz.2015.mmr.2

Abstract

In today's financial market there is a debate on the efficiency of markets between theoreticians
and practitioners. While the former are trying to demonstrate the efficiency of financial
markets, the second group believes that financial markets are not efficient. Evidence
showing the efficiency of financial markets would also be a proof of the fact that asset portfolio
managers would not be able to gain a higher rates of return than the market portfolio
rates of return, in the long run. One way to demonstrate the thesis of the inefficiency of the
financial markets, it is, among others, examination of calendar effects. Their existence undermines
the efficient market theory and allows to construct an investment strategy which
permits to obtain positive excess returns (above the rate of return of analyzed stock market
index).
The article presents a study of effectiveness of 22 selected stock indices with the use of
the rates of return in the months of January and December (so called “January effect” and
“turn-of-the-year” effect, respectively). The portfolio replicating the stock index was bought
at the close prices on the last session in one month, and sold at the close prices on the last
session of the following month. The presence of market inefficiency has been demonstrated
in the January in case of two indices: BUX and Nasdaq and in December in the following 15
cases: All-Ord, BUX, CAC40, DJIA, DJTA, DJUA, EOE, FTSE100, MEX-IPC, Nasdaq,
Nikkei, Russel, SP500, TSE and WIG. Thus, in the case of some indices, the conclusions of
other researchers has been confirmed, but other studies should be regarded as pioneering.

Full text (pdf)

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About this Article

TITLE:
ANALYSIS OF MONTHLY RATES OF RETURN IN JANUARY AND DECEMBER ON THE EXAMPLE OF SELECTED WORLD STOCK EXCHANGE INDEXES

AUTHORS:
Krzysztof BOROWSKI

AUTHORS AFFILIATIONS:
Institute of Banking and Business Insurance, Warsaw School of Economics,
Warsaw

JOURNAL:
Modern Management Review
22 (1/2015)

KEY WORDS AND PHRASES:
market efficiency; financial market seasonality; market anomalies; January
effect, December effect

FULL TEXT:
http://doi.prz.edu.pl/pl/pdf/zim/156

DOI:
10.7862/rz.2015.mmr.2

URL:
http://dx.doi.org/10.7862/rz.2015.mmr.2

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