Economic cycles and calendar effects in stock prices: Evidence from Spanish market
| Autor | João Dionísio |
| Cargo del Autor | Universidade da Beira Interior, Department of Management and Economics, Estrada do Sineiro, 6200-309 Covilhã, Portugal. |
| Páginas | 1-24 |
1
Capítulo 1
Economic cycles and calendar effects in stock prices: Evidence from Spanish
market
João Dionísio
J.Dionísio
Universidade da Beira Interior, Department of Management and Economics, Estrada do Sineiro, 6200-309 Covilhã,
Portugal.
jdm@ubi.pt
M.Ramos, F.Miranda (eds.) Optimización-Estocástica-Recursiva-Coherente-Sistémica y sus variantes (probabilidad,
econometría y estadística aplicada), Temas Selectos de Optimización-©ECORFAN-Santiago de Compostela, España,
2012.
2
Abstract
This article examines the relationship between economic cycles and the day-of-the-week effects in
Spanish market returns. During the period 1993 to 2011 the Spanish economy has experienced
significant changes in their economic performance. In this period it is possible to identify three
large and distinct economic sub periods. These sub periods provide an opportunity to evaluate the
effect of the underlying economic fundamentals on the calendar effects. The effects of the sub
periods’ economic fundamentals on the day-of-the-week returns are assessed using a methodology
incorporating orthogonal contrasts variables. This approach address the problem of multiple testing
that arises when tests for the simultaneous effect of multiple variables on the dependent variable
and the respective t statistics on the variables will not be independent since all the test statistics
contain the same estimated term in the statistics. This feature increases the simultaneous
significance level of the family of t-tests which may incorrectly lead to the rejection of null
hypotheses. As a result, this approach allows for a robust analysis on the existence of the day-of-
the-week effects, the economic conditions effects on returns and the interaction between both
effects.
Daily return series from the main Spanish stock index, from 6 July 1993 to 30 December
2011, were used for the model estimation. Results suggest no evidence for an effect of the economic
cycles on day-of-the-week returns. Additionally, results did not show any evidence for the existence
of a day-of-the-week effects throughout the study period. However, results showed a moderately
significant difference in returns between the first, second and the third economic sub period. This
return differential is due to the negative extreme movements in returns occurred in the third sub
period.
1 Introduction
The existence of calendar effects has been documented over the last three decades in the equity
markets. These studies challenged the assumptions of the dominant theory (Efficient Market
hypothesis) and suggested alternative explanations for possible regularities in prices both due to the
behaviour of investors and institutional arrangements. However, various empirical studies have
reported a decline on seasonality over time. Additionally, many studies reporting significant
calendar effects are embedded with problems of multiple testing, which may incorrectly lead to the
rejection of the null hypotheses for a given individual significance level since the respective t
statistics on the variables will not be independent and the simultaneous significance level of the
family of t-tests will increase.
The purpose of this paper is to add to this body of work on calendar effects an analysis on
this field in Spanish equity market, examining the main and the interaction effects in returns by day-
of-the-week and economic cycles. The times series approach to the economic cycle - day-of-the-
week relation on returns is examined using daily data for the IBEX 35 index over the period 6 July
1993 to 30 December 2011. To our knowledge there are no studies analyzing the main and
interaction effects of the economic cycles and day-of-the-week effects on returns.
Since the mid-90s the Spanish economy has experienced significant changes in performance
that translated roughly into three distinct economic periods, as evidenced by the significant different
values of the descriptive statistics of the main economic and financial indicators. From the values of
these descriptive measures of the Spanish economy we identify three distinct economic periods. The
effects of these sub periods on the day-of-the-week effects on returns are the focus of this study.
Several studies have reported evidence of calendar effects in daily returns.
Para continuar leyendo
Solicita tu prueba