Empirical Evidence of Calendar Anomalies for the Egyptian Stock Market

Abstract

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In this paper, we analyse prominent calendar anomalies for the Egyptian stock market. We also evaluate if there is any volatility clustering in the sample market and the reaction of volatility to positive and negative shocks (news) in the Egyptian stock market. The closing prices of ten indices of the Egyptian Stock Exchange have been examined over the period 2012-2019. The calendar anomalies pertaining to the day-of-the-week effect, Halloween effect, trading-month effect, and month-of-the-year effect have been analysed. Dummy variable regression technique is used to test the calendar anomalies. Further, the GARCH family of models, including GARCH-M and T-GARCH techniques have been utilised to test for the nature of volatility clustering. The results validate that day-of-the-week anomaly is strongly observed in the data. However, the other anomalies have not been observed. The results also confirm the presence of volatility clustering. The results finally show that negative shocks result in more volatility clustering than positive shocks. There has been little research pertaining to understanding the nature of volatility clustering for the Egyptian markets. Thus, to enrich the literature for the emerging markets and contribute to the area, we conduct a comprehensive study on calendar anomalies for the Egyptian market.

Keywords: Calendar Anomalies, Volatility Clustering, GARCH, T-GARCH, GARCH-M, Egypt, Market Efficiency

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