![]() ![]() Whilst the literature on conventional financial markets of industrialised countries is reasonably high, there is not that much empirical evidence for stock markets of developing countries given the fact that some of them were only established a decade or so ago. The first one to bring this topic up was French (1980) who found a weekend effect on the US stock market. One such instance is calendar effects meaning that stock market returns vary significantly between certain days or months. Ever since it has been released the EMH has been attacked by researchers, questioning the validity of the theory by presenting counter examples or rather anomalies. If the EMH holds, then returns should also not be predictable. ![]() If a company just announces what everyone previously expected anyway, those companies’ shares should not change in value. Under these circumstances, news only has an impact on asset prices if it is surprising. The theory goes even further by assuming that prices reflect expectations as well. The EMH argues that financial markets take all relevant and available information into account immediately after it has been released. Clearly, the debate heated up again when Fama and Shiller won the Nobel Memorial Prize in Economic Sciences in 2013. The discussion about whether financial markets are efficient with respect to the processing of information started with the seminal work of Fama (1970). The academic debate between proponents and opponents of the Efficient Market Hypothesis (EMH) shows no sign of abating. The evidence for theories put forward when analysing Western stock markets is – at best – mild. One should, therefore, be careful when interpreting calendar effects on Islamic stock markets. However, those effects are prone to changes when different models or distributions are used. In fact, there is evidence for calendar anomalies on all stock markets. Thirdly, we study whether those calendar effects are still apparent when we control for volatility clustering. Secondly, we analyse whether there are any seasonal patterns in stock markets’ returns by conventional estimation techniques. Firstly, we deliver a complete literature review of previous studies dealing with calendar effects on Islamic stock markets showing that there is still a lack of consensus about the effects. Thus, the aim of this study is to provide a comprehensive analysis of calendar anomalies on Islamic stock markets. It is particularly interesting to test not only for calendar effects in the conventional Gregorian calendar but also in other calendars like the Hijri calendar. Whilst there is a plethora of studies for well-developed stock markets, there is still a lack of comprehensive studies for some small or emerging financial markets. Among these are calendar anomalies, first described by French back in 1980. There is a long tradition in detecting anomalies of the Efficient Market Hypothesis. ![]()
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