An analysis of Ramadan effect by GJR-GARCH model: case of Borsa Istanbul
DOI:
https://doi.org/10.12775/OeC.2016.033Keywords:
stock returns, anomalies, Ramadan effect, GJR-GARCHAbstract
Although there are a lot of studies testing the calendar effect in BIST, there are limited numbers of studies testing the Ramadan effect. In this study, the period of 05 August 1997?24 October 2014 is tested by the GJR-GARCH(1,1) model on the basis of BIST 30, 100, all, second national, sectors and sub-sectors. In some of the models, the dummy variable of Ramadan did not have significant coefficients. In the models that provide significant value of the dummy variable of Ramadan, coefficients of this variable are negative. This shows that, in the Ramadan, return rates of the second national index, chemistry, and manifacturing, textile, trust companies sectors are affected negatively. Any significant result could not be found whether Ramadan has effect upon other sector indices. Findings are in the direction that even if the month of Ramadan generally doesn?t increase the average return, it makes a positive impact on the market by reducing the volatility of returns.
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References
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Ayodeji, O. R. (2010). Oil Price Volatility, Global Financial Crisis and the Month-of-the Year Effect. International Journal of Business and Management, 5(11).
Balaban, E., Bayar, A., & Kan, Z. B. (2001). Stock Returns, Seasonality and Asymmetric Conditional Volatility in World Equity Markets. Applied Economic Letters, 8.
Bampinas, G., Fountas, S., & Panagioditis, T. (2015). The Day-of-the-week Effect Is Weak: Evidence from the European Real Estate Sector. Journal of Economics and Finance, 40(3). DOI: 10.1007/s12197-015-9325-7.
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Bollerslev, T., & Wooldridge, J. M. (1992). Quasi Maximum Likelihood Estimation and Inference in Dynamic Models with Time Varying Covariances. Econometric Reviews, 11(2). DOI: http://dx.doi.org/10.1080/07474939208800229.
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Boujelbene, A., Mouna, B. Y., & Bouri, A. (2009). Overconfidence Bias: Explanation of Market Anomalies French Market Case. Journal of Applied Economic Sciences, 4(1).
Choudry, T. (2001). Month of the Year Effect and January Effect in Pre WW1 Stock Returns: Evidence from a Nonlinear GARCH Model. International Journal of Finance and Economics, 6(1). DOI: 10.1002/ijfe.142.
Dumitriu, R., & Stefanescu, R. (2013). Gone Fishin? Effects on the Bucharest Stock Exchange. Annals of the University of Petroşani, Economics, 13(1).
Glosten, L. R., Jagannathan, R., & Runkle, D. E. (1993). On the Relation Between the Expected Value and the Volatility of Normal Excess Return on Stocks. Journal of Finance, 48(5). DOI: 10.1111/j.1540-6261.1993.tb05128.x.
Halari, A., Tantisantiwong, N., Power, D. M., & Helliar, C. (2015). Islamic Calendar Anomalies: Evidence from Pakistani Firm-level Data. Quarterly Review of Economics and Finance, 58. DOI: http://dx.doi.org/10.1016/j.qref.2015.02.004.
Husain, F. (1998). A Seasonality in the Pakistani Equity Market: The Ramadan Effect. Pakistan Development Review, 37(1).
Iqbal, M. S., Kouser, R., & Azeem, M. (2013). Conventional and Islam?c Anomalies in Karachi Stock Exchange. Science International (Lahore), 25(4).
Kaya, E., & K?l?nç, A. (2014). Do Ramadan Affect the Stock Market? An Econometrical Analysis for Turkey. 18th Finance Symposium, Denizli, Turkey, October 15-18.
Li, X., Miffre, J., & Brooks, C. (2007). Momentum Profits and Time-Varying Unsystematic Risk. Nice, France: Edhec Risk and Asset Management Research Centre.
Mustafa, K. (2011). The Islamic Calendar Effect on Karachi Stock Market. Pakistan Business Review, October.
Oguzsoy, C. B., & Guven, S. (2004). Holy Days Effects on Istanbul Stock Exchange. Journal of Emerging Market Finance, 3(1). DOI: 10.1177/09726527 0400300104.
Rapach, D. E., Strauss, J. K., & Wohar, M. E. (2008). Forecasting Stock Return Volatility in the Presence of Structural Breaks. In D. E. Rapach & M. E. Wohar (Eds.). Frontiers of Economics and Globalization Vol. 3: Forecasting in the Presence of Structural Breaks and Model Uncertainty. Bingley: Emarald.
Seyyed, F. J., Abraham, A., & Al-Hajji, M. (2005). Seasonality in Stock Returns and Volatility: The Ramadan Effect. Research in International Business and Finance, 19(3). DOI: 10.1016/j.ribaf.2004.12.010.
Zakoian, J. M. (1994). Treshold Heteroscedastic Models. Journal of Economic Dynamics and Control, 18(5). DOI: 10.1016/0165-1889(94)90039-6.
