Market AnomaliesMarket Anomalies

Seang Oudom 11761Seang Oudom 11761

Ong Wei Han 10967Ong Wei Han 10967

Bahariah Latan 10631Bahariah Latan 10631

Chow Cheah Hui 10638Chow Cheah Hui 10638

Do Thi Mai Chi 10546Do Thi Mai Chi 10546

Market AnomaliesMarket Anomalies

In financial markets, anomalies refer In financial markets, anomalies refer to situations when a security or to situations when a security or group of securities performs contrary group of securities performs contrary to the notion of efficient markets, to the notion of efficient markets, where security prices are said to where security prices are said to reflect all available information at reflect all available information at any point in time.any point in time.

The Islamic Calendar Effect in The Islamic Calendar Effect in Karachi Stock MarketKarachi Stock Market

Written by Khalid Mustafa, Assistant Written by Khalid Mustafa, Assistant Professor, Department of Economics, Professor, Department of Economics, University of KarachiUniversity of Karachi

Used conditional and unconditional Used conditional and unconditional riskrisk

Four major points : review of Four major points : review of literature, econometric methodology, literature, econometric methodology, data, empirical findings data, empirical findings

Months of Islamic Calendar Months of Islamic Calendar ObservedObserved

SyaabanSyaaban RamadhanRamadhan SyawalSyawal ZulkaedahZulkaedah ZulhijjahZulhijjah MuharramMuharram

Review of LiteratureReview of Literature

Little attention givenLittle attention given Alper and Aruoba (2001) analyze Alper and Aruoba (2001) analyze

various macroeconomic variables in various macroeconomic variables in TurkeyTurkey

Seasonal adjustment procedures Seasonal adjustment procedures based on fixed holidays often failedbased on fixed holidays often failed

Econometric MethodologyEconometric Methodology

Methodology of Ariel (1987), Methodology of Ariel (1987), Lakonishok and Smidt (1988), Jaffe Lakonishok and Smidt (1988), Jaffe and Westerfield (1989) usedand Westerfield (1989) used

Mathematical equations usedMathematical equations used

DataData

Daily covered from March 1998 to Daily covered from March 1998 to September 2004September 2004

Daily Business RecorderDaily Business Recorder Return is calculated by the difference Return is calculated by the difference

of two successive log stock pricesof two successive log stock prices

Empirical FindingsEmpirical Findings

Average return is smaller and Average return is smaller and insignificant during Ramadhaninsignificant during Ramadhan

Positive and significant average Positive and significant average return is found in the month of return is found in the month of Syawal and ZulkaedahSyawal and Zulkaedah

Small Sized AnomalySmall Sized Anomaly

What is small sized anomaly?What is small sized anomaly? Let's look at this scenarioLet's look at this scenario

Big companies – earn a lot money, Big companies – earn a lot money, stable, high qualitystable, high quality

Small companies – unknown, Small companies – unknown, unreliable, earn very few money, poorunreliable, earn very few money, poor

Q :Invest in big companies or small Q :Invest in big companies or small companies?companies?

One example of getting rich!!One example of getting rich!! You invest in 10 companiesYou invest in 10 companies Share price of all 10 companies is 1 centShare price of all 10 companies is 1 cent You buy 100,000 units for all 10 companies. You buy 100,000 units for all 10 companies. For each company: 100000*RM0.01 = For each company: 100000*RM0.01 =

RM1000RM1000 Total investment: RM1000*10 = RM10,000Total investment: RM1000*10 = RM10,000 Unlucky event: Share price of 9 companies Unlucky event: Share price of 9 companies

fallfall Lucky event: Share price of the 10Lucky event: Share price of the 10thth

company increases to RM1.00 per unit company increases to RM1.00 per unit shareshare

Result: RM1.00 * 100000 = RM100000Result: RM1.00 * 100000 = RM100000

• Unstable – not consistent over the yearsUnstable – not consistent over the years• Argument – some people deny the anomalyArgument – some people deny the anomaly

Superstitious Market Superstitious Market Indicators:Indicators:

The Super Bowl IndicatorThe Super Bowl Indicator

It is some nonmarket signals that It is some nonmarket signals that some people believe will accurately some people believe will accurately indicate the direction of the market. indicate the direction of the market.

The Super Bowl indicator has correctly The Super Bowl indicator has correctly predicted the direction of the Dow predicted the direction of the Dow Jones Industrial Average in 33 of the Jones Industrial Average in 33 of the 42 years the game has been played. 42 years the game has been played.

Between 1967 and 1997, the indicator Between 1967 and 1997, the indicator was correct 28 out of 31 times – a 90% was correct 28 out of 31 times – a 90% success rate. success rate.

Success rate dropped from 80% to Success rate dropped from 80% to 79% last year . 79% last year .

  The Super Bowl IndicatorThe Super Bowl Indicator

how it works?how it works?

When an “original” National Football When an “original” National Football League team wins the big game, the League team wins the big game, the market rises for that year.market rises for that year.

but it falls when the winner is a team but it falls when the winner is a team that joined the National Football that joined the National Football League because of the league’s League because of the league’s merger with the American Football merger with the American Football League in 1970. League in 1970.

When the indicator was When the indicator was wrongwrong

In 2008, the victorious New York In 2008, the victorious New York Giants, which joined the NFL in 1925, Giants, which joined the NFL in 1925, defeated the favorite New England defeated the favorite New England Patriots, an indication that the Patriots, an indication that the market would rise. market would rise.

However, the market did not rise.However, the market did not rise.

When the indicator was When the indicator was rightright

In both 2006 and 2007, the two In both 2006 and 2007, the two teams vying for the Lombardi Trophy teams vying for the Lombardi Trophy both had their roots in the original both had their roots in the original NFL. In theory, the market would rise NFL. In theory, the market would rise no matter who won, and in both no matter who won, and in both years, it did.years, it did.

Announcement AnomaliesAnnouncement Anomalies

Stock Split Effect: Stock Split Effect: before and after a before and after a company announces a stock split, the stock company announces a stock split, the stock price normally rises.price normally rises.

Short-Term Price Drift: Short-Term Price Drift: stock prices react and stock prices react and often continue to move in the same directionoften continue to move in the same direction

Merger Arbitrage: Merger Arbitrage: the value of the company the value of the company being acquired tends to rise while the value being acquired tends to rise while the value of the bidding firm tends to fallof the bidding firm tends to fall

Superlattice Power Inc.Superlattice Power Inc. Superlattice Power Inc. engages in Superlattice Power Inc. engages in

developing rechargeable lithium ion developing rechargeable lithium ion batteries for power production in the batteries for power production in the United States.  It develops United States.  It develops rechargeable battery system for rechargeable battery system for various applications ranging from various applications ranging from portable electronics to onboard portable electronics to onboard energy storage in electronic vehicles. energy storage in electronic vehicles.

Superlattice Power, Inc. (OTCBB: SLAT) 3-Superlattice Power, Inc. (OTCBB: SLAT) 3-for-1 Forward Stock Split for Record for-1 Forward Stock Split for Record Date to Be Effective 12 October-09, or Date to Be Effective 12 October-09, or Such Later Effective Date Approved by Such Later Effective Date Approved by FINRAFINRA

LAS VEGAS, NV, Sep. 18, 2009 LAS VEGAS, NV, Sep. 18, 2009 http://www.investorpoint.comhttp://www.investorpoint.com

OTCBB: over the counter bulletin boardOTCBB: over the counter bulletin board

FINRA: FINRA: Financial Industry Regulatory Authority Financial Industry Regulatory Authority 

Announcement AnomaliesAnnouncement AnomaliesSuperlattice Power, IncSuperlattice Power, Inc

From Wall SteetFrom Wall Steet

www.transwordwww.transword

Undervalued Stock Superlattice Power Undervalued Stock Superlattice Power Inc. (OTCBB: SLAT) Highlighted on Inc. (OTCBB: SLAT) Highlighted on Undervalued Penny Stocks list to Undervalued Penny Stocks list to Watch by Wall Street Grand Watch by Wall Street Grand

LAS VEGAS, NV, Sep. 18, 2009 LAS VEGAS, NV, Sep. 18, 2009 

Superlattice Power, Inc

http://www.investorpoint.comhttp://www.investorpoint.com

Superlattice Power, Inc. 3-for-1 Superlattice Power, Inc. 3-for-1 Forward Stock Split Will Be Forward Stock Split Will Be Effective Opening of Business Effective Opening of Business Monday October 19, 2009Monday October 19, 2009

Oct. 16, 2009 (GlobeNewswire) Oct. 16, 2009 (GlobeNewswire) 

CALENDAR EFFECTCALENDAR EFFECT

Presented by Do Thi Mai Chi Presented by Do Thi Mai Chi

What is Calendar effect?What is Calendar effect?

Stock returns are cyclicalStock returns are cyclical

Popular types:Popular types:• Weekend effectWeekend effect• Turn-of-the-month effectTurn-of-the-month effect• Turn-of-the-year effectTurn-of-the-year effect• January barometerJanuary barometer

Weekend effectWeekend effect

Monday effect / day-of-the-week effectMonday effect / day-of-the-week effect Perspectives:Perspectives:

• Stock returns: negative from Friday to MondayStock returns: negative from Friday to Monday• Monday returns: lower than FridayMonday returns: lower than Friday

Researches:Researches:• Osborne (1962) and Cross (1973): S&P 500 Osborne (1962) and Cross (1973): S&P 500

Index:Index: Friday returns > the averageFriday returns > the average Monday returns < the average.Monday returns < the average.

• by Gibbons and Hess (1981): for 30 stocks from by Gibbons and Hess (1981): for 30 stocks from DJIA Index:DJIA Index:

returns were negative on Mondaysreturns were negative on Mondays

US stock marketUS stock market

International stock market

Weekend effect in Bursa MalaysiaWeekend effect in Bursa Malaysia( a study by Universiti Malaysia Sabah)

KLCI data in:•Pre-crisis period: 2 December 1993 – 31 May 1997 •Crisis: 1 June 1997 – 30 January 1998 (Asian financial crisis)•Post-crisis: 1 February 1998 – 10 October 2005

Turn-of-the-month effectTurn-of-the-month effect

Stock prices - larger on the last day Stock prices - larger on the last day of each month & the first 3 days of of each month & the first 3 days of the month later. the month later.

initially identified by Lakonishok and initially identified by Lakonishok and Smidt (1988) by using data series of Smidt (1988) by using data series of DJIA Index in the period 1897-1986DJIA Index in the period 1897-1986

Research Research by John J. McConnell and Wei Xu by John J. McConnell and Wei Xu from Purdue Universityfrom Purdue University

Turn-of-the-year effectTurn-of-the-year effect

January effectJanuary effect returns - higher at the end of returns - higher at the end of

December & for the first few days of December & for the first few days of January, especially for small-cap January, especially for small-cap stocksstocks

Research by Jeffrey A. Hirsch Research by Jeffrey A. Hirsch

January BarometerJanuary Barometer

““as January as January goes, so goes goes, so goes the year” - Yale the year” - Yale Hirsch, the Hirsch, the founder of the founder of the annual Stock annual Stock Trader’s Trader’s AlmanacAlmanac

Src: CNNMoney.com

CNNMoney:CNNMoney:Worst January ever for Dow, Worst January ever for Dow, S&P 500 – 30/01/2009S&P 500 – 30/01/2009

January returns in S&P 500 of -4.6%January returns in S&P 500 of -4.6%

Bloomberg InsightBloomberg Insight