The Holiday Effect : Evidence From Cross Listed Stocks

1599 WordsApr 23, 20167 Pages
The Holiday Effect: Evidence From Cross-Listed Stocks Mohammed Alhashim FINA-6311 Seminar in the Theory of Corporate Finance April 26, 2016 1. Introduction One of confound empirical findings reported in recent finance literature is the presence of abnormally high stock returns on the day before holidays. In this paper, we are trying to investigate the holiday effects in a novel context. Specifically, we attempt to test the presence of holiday effect for a sub-group of stocks namely, the cross-listed stocks. We are interested in the holiday effects for the US stocks that are listed in a forging stock exchange. Both academic and practitioners in the field of finance have investigated the holiday effects. In one…show more content…
Section III provides the literature review. The data description and empirical design are presented in Section III. Concluding remarks follow in Section IV. 2. Hypothesis development  H1: the holiday effects will be more pronounced for stocks listed in US exchanges only compare to cross-listed stocks. . 3-Literature Review The topic of holiday effects has been studied extensively using both US markets data and international markets data 3.1 Holiday Effect in US Markets Ariel (1990) documents that the average preholiday return for the period from 1963-1982, using both the CRSP value-weighted and equally weighted index, is nine to 14 times higher than the mean return on the remaining days. Using a nighty years’ worth of data (1897-1986), Lakonishok and Smidt (1988) conclude that the preholiday rate of return is 23 times larger than the regular daily rate of return. Liano el al. (1992) provides an evidence of the presence of the holiday effects in OTC market. Finally, all previous studies document that pre-holiday returns are not a manifestation of other calendar anomalies. 3.2 Holiday Effect in International Markets The pre-holiday effects are also documented in the international stock exchanges. Mills and Coutts (1995), Arsad and Coutts (1997) and Meneu and Pardo (2001) who observe a pre-holiday effect in the FT-SE Mid 250 index, FT 30 index,
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