LAPPEENRANTA UNIVERSITY OF TECHNOLOGY

DEPARTMENT OF BUSINESS ADMINISTRATION

SECTION OF FINANCE

Calendar anomalies in stock returns:

Evidence from South America
30.11.2007

Bachelor’
s thesis
Mika Rossi
TABLE OF CONTENTS:

1. INTRODUCTION ............................................................................................................1

2. THEORETICAL BACKGOROUND................................................................................3

2.1 Efficient market hypothesis.........................................................................................3

2.2 Different time patterns in security returns....................................................................4
2.3 Previous studies ..........................................................................................................5
2.2.1 Studies on the Emerging Markets.......................................................................8
2.2.2 Other studies....................................................................................................10
2.3 Possible factors explaining the time patterns .............................................................11

3. DATA AND METHODOLOGY ....................................................................................14

3.1 Index descriptions .....................................................................................................14

3.2 Data and its features..................................................................................................14
3.2 Methodologies ..........................................................................................................18

4. RESULTS ......................................................................................................................20

4.1 Results for daily data for the full sample period ........................................................20
4.2 Results for daily data for the sub-periods...................................................................22
4.3 Results for monthly data for the full sample period ...................................................26
4.4 Results for monthly data for the sub-periods .............................................................28

5. CONCLUSIONS ............................................................................................................31

REFERENCES...................................................................................................................33
1. INTRODUCTION
The efficient market hypothesis suggests that all securities are priced efficiently to
fully reflect all the information of the intrinsic value. An efficient market is one where
all unexploited returns are eliminated by arbitrage. However, in a context of financial
markets and especially in the case of equity returns several seasonal effects that
create higher or lower returns depending on the time have been noted. They are
called anomalies because they cannot be explained by traditional asset pricing
models. Examples of such patterns include e.g. the January effect, the Day-of-the-
week effect and the week of the month effects. The appearance of such anomalies
violates the weak form of market efficiency, because asset prices are not random,
but predictable based on some calendar effect. This allows investors to develop
trading strategies which makes abnormal profits on the basis of such anomalies. For
example, investors may be willing to sell securities on Fridays and willing to buy on
Mondays in order to take the advantage of these effects.

An extensive literature has documented these calendar anomalies on stock

markets. Gibbons and Hess (1981) found that stock returns on US stock markets
are significantly lower on Mondays and higher on Fridays. Jaffrey and Westerfield
(1985) found some international evidence of similar patterns. Afterwards more
international evidence on stock markets is found by e.g. Condoyanni et al. (1987)
and e.g. Ajay & al. (2004) on emerging markets. In addition to studies presented
before e.g. Kato and Schallheim (1985) presented evidence of so called January
effect. Existing empirical evidence shows similar patterns also on bond markets.
Jordan and Jordan (1991) found the Day of the week effect on corporate bond
returns and later e.g. Nippani & Arize (2007) have reported similar results.

However, most of the former studies have mainly and extensively concentrated on
the US market or on another developed market like Japan and the UK. Little
attention is paid to the emerging equity markets. The emerging markets have been
a hot topic among the investors during the last years and because of their
attractiveness in international finance it is interesting to study if those kinds of
anomalies appear also on those markets.

1
In this bachelor thesis we study, if there exist seasonal patterns in stock returns on
emerging stock markets in Latin America including Argentina, Mexico, Chile and
Brazil. The purpose of this thesis is to analyse day of the week effects and monthly
patterns during a time period from 1997 to 2006 and to provide some sort of
evidence if these patterns appear also there. Another objective is to study whether
those effects have declined or disappeared over the years by splitting the whole
data to two sub-periods. Some studies have documented that seasonal patterns
might be time varying and that they are declining at least on some more developed
market. Therefore it is interesting to try to find some evidence how it is on these
markets which we can consider at least a bit undeveloped. The declining of the
seasonal patterns may be one sign of a trend toward more efficient capital markets.

This bachelor thesis is organised as follows. The next chapter gives the empirical
background of the market efficiency, introduces the main seasonal patterns and
covers the former empirical studies and the results. In chapter 3 we describe the
data and its properties. Chapter 4 presents the empirical results. Finally chapter 5
concludes this thesis and gives some topics for further research.

2
2. THEORETICAL BACKGOROUND

2.1 Efficient market hypothesis

Financial markets are allocationally efficient when all the firms with the most
promising investment opportunities have access to the needed funds. But in order
that the markets are allocationally efficient they need to be both internally and
externally efficient. An externally efficient market means that information is quickly
and largely disseminated allowing each security’
s price to adjust rapidly to new
information so that it reflects investment value. An internally efficient market refers
to markets where brokers and dealers compete fairly so that transaction costs are
low and the speed of transactions is high. (Sharpe et al. 1999)

When someone refers to efficient capital markets, they mean that security prices
reflect fully all the information that is available and investors incorporate new
information immediately and fully in securities prices. This information has to be
something new and surprising, anything that is not predictable. And because all the
information is incorporated in prices, investors are not able to make any excess
returns. In a perfectly efficient market price changes are random and asset prices
follow so called random walk model and that the returns are identically distributed
over time. Because returns are identically distributed there should not exist such
patterns like the day of the week effect. Or if such patterns do exist, they should be
eliminated when investors trade their securities. (Elton-Gruber, 1995)

There are three forms of market efficiency. These forms are distinguished by the
degree of information reflected in security prices. In the first level securities prices
reflect all the information contained in the record of past security prices. This form of
efficiency is called weak form of efficiency. If market meets the weak form criteria, it
is not possible to make superior profits by studying the past returns and e.g. the
calendar anomalies should not exist. So prices should follow the random walk.
(Sharpe et al. 1999)

The second form of efficiency requires that securities prices reflect both past prices
and all other published information. This form is better known as the semi strong

3
form of market efficiency. If markets meet the semi strong criteria, then the prices
will immediately adjust for public announcements.

The third form of efficiency is called a strong form of efficiency. This means that the
prices reflect all both public and private information of the certain security. All these
three forms are transparent. It means that if a certain market meets the semi strong
criteria it also meets the weak form criteria.

2.2 Different time patterns in security returns

A number of studies have documented different time patterns in security returns.

Returns are systematically higher or lower depending on e.g. the time of the day,
the day of the week, the week of the month and month of the year. (Elton-Gruber,
1995)

One pattern that has been studied extensively is so called Day of the week effect.
Several papers have shown that the distribution of common stock returns is not
identical for all days of the week but instead it might vary depending on the day. The
main findings have been that returns on Mondays tend to be lower compared with
the other days of the week1. On the other hand there exists also evidence that
returns on Fridays tend to be higher compared with other days of the week creating
the Friday effect. However, a number of studies have shown that this pattern can
vary from one country to another. For example strong negative Tuesday effect has
been found in several countries, particularly in Europe and Asia2. Some papers
have also documented of so called reversal Day of the week effect. This means that
highest returns tend to occur at the beginning of the week and the lowest returns at
the end of the week3.

1
When it comes to Day of the week effect, some researchers talk about the weekend effect. This
refers to a fall in some stock returns between the Friday closing and Monday opening (Cuthbertson
2000, 167)
2
The negative Tuesday effect is documented e.g. by Jaffe and Westerfield (1985), Condoyanni et al.
(1987) and Martikainen and Puttonen (1996).
3
E.g. Mehdian and Perry (2001) documented some evidence of reversal Monday effect on US
markets.

4
In addition to daily patterns in security prices, some researchers have also
documented evidence of monthly patterns. A number of papers have reported so
called January effect4. This means that returns on January are higher compared
with other months of the year. Besides the January effect other monthly patterns
have been discovered. They include for example, Intra month or Turn of the month
effects. This means that on average, positive returns exist only during the first half of
the month beginning from the last few days of the previous month. Average return is
also significantly higher in the first half of the month5. (Elton-Gruber, 1995)

2.3 Previous studies

As it was mentioned before, several papers have studied time patterns in asset
prices. At first studies focused mainly on the US stock markets. Gibbons and Hess
(1981) studied the Day of the week effect in US stock returns. The sample period
was 1962-1978 and the data covered S & P 500 and CRSP indices. They first
tested time patterns for overall sample period and then divided that data to sub-
periods. They found that for the overall sample period, the average annual return for
Monday ranges from -33.5% (S & P 500) to -26.8% (the equally weighted CRSP).
When they divided the data to sub periods they found that for all periods except one
the hypothesis of equality was rejected for each index and lowest returns appeared
on Mondays. Only for the period from November 1974 to December 1979 the
negative returns occurred on Tuesdays. In addition Gibbons and Hess reported
significantly higher returns on Wednesdays and on Fridays. Later e.g. Lakonishok
and Smidt (1988) documented similar results with negative Monday returns on US
stock market.

More recently, Mehdian and Perry (2001) restudied the Monday effect on US equity
markets using returns from three large-cap indices and two small-cap indices over a
period of 1964-19986. Their results showed that in the full sample period and in the
sub-period from 1964 to 1987 returns for all indices were significantly lower on

4
January effect is sometimes known as the turn of the year effect. To be more exact, this refers to
the phenomena that the highest returns appear during the first week of the January.
5
Also so called Holiday effect is discovered. This means higher positive returns just before holidays.
6
The Dow Jones Composite (DJCOMP), the New York Stock Exchange Composite (NYSE) and the
S&P 500 indices represented large-cap stocks and the Russel 2000 and the Nasdaq indices
represented the small-cap stocks, respectively.

5
Mondays compared with other days. Instead in the second sub-period from 1987 to
1997 they found that the Monday returns were significantly positive for the large-cap
indices but for the small-cap indices Monday returns remained negative and
significantly lower compared with the other days. Therefore, they documented that
the Monday effect had declined over time and that it had also been partly reversal of
the traditional Monday effect e.g. documented by Gibbons and Hess (1981).

Besides the weekday anomalies, Mehdian and Perry (2001) investigated also
monthly patterns on the same market during the same time period. For the full
sample period the found that January returns were positive and significant in all
three indices. In the first sub-period (1964-1987) the returns in January were also
significantly positive, but in the second sub-period (1987-1998) there did not appear
any significant January effect and therefore it had disappeared7.

Jaffe and Westerfield (1985) studied the Day of the week effect on four international
stock markets. Their study was the first to provide some international evidence of
this anomaly. Their paper examined stock returns in the U.K, Japan, Canada and
Australia. The indices and time periods were: Japan- the Nikkei Dow from 1970 to
1983, Canada- the Toronto stock exchange index from 1976 to 1983, Australia- the
Statex actuaries index from 1973 to 1982 and the U.K- The Financial Times ordinary
share index from 1950 to 1983.

Their results clearly documented similar time patterns on international stock markets
as well. For the returns in the UK and Canada the lowest returns occurred on
Mondays, but in contrast of the earlier studies based on US stock market, they
found that the lowest mean returns for both Japanese and Australian stock market
occurred on Tuesdays. These results are partly similar with the results documented
by Gibbons and Hess (1981). However Jaffe and Westerfield documented new
evidence of the negative Tuesday effect.

Schallheim and Kato (1985) reported more evidence of the anomalies in the Tokyo
Stock Exchange over the period 1952-1980. They documented a positive January

7
Haugen and Jorion (1996) found also that the January effect has disappeared on US markets.

6
effect but in addition they found statistically significant positive returns for June as
well. Shallheim and Kato suggested that there might have been some relation
between the firm size and the positive June returns because it appeared mainly for
small firms.

More international evidence has been documented e.g. by Condoyanni & al. (1987)
when they studied six national stock exchanges in Canada, UK, Australia, France,
Japan and Singapore during a period from 1969 to 1984. The results for Canada
and the UK showed that negative returns occurred on Mondays. On the other hand
the results for France, Japan, Australia and Singapore showed negative returns on
Tuesdays. These results were partly similar with the results documented by Jaffe
and Westerfield (1985) on the same markets. However, Condoyanni et al. proved
that these patterns are not necessarily similar across the markets on the same
continent e.g. within Europe. At least results were different between France and the
UK.

Arsad and Coutts (1997) reexamined security price anomalies in the London
international stock exchange over a 60 year period from roughly 1935 to 1994 by
using the FT 30 index8. Their results broadly supported the former studies e.g.
made by Jaffe and Westerfield. They found that for both the whole sample period
and the sub-periods the Monday return was significantly negative compared with the
other days. When it comes to monthly patterns they also documented significantly
positive returns on January for the whole time period. In addition they found positive
returns also in the months of April and December. For the sub-periods the month of
April was the only month which displayed positive returns for the all periods.

Gu (2006) studied the January effect in major equity indices of Canada, France,
Germany, Japan and the United Kingdom roughly during 1970-2000. His results
confirmed the January anomaly for all market returns before the 1990. After the
1990 there was a declining trend in every country. He also reported that the
anomaly was weaker during the period of weak real GDP and vice versa. The effect

8
FT 30 index is also known as Financial Times Industrial Ordinary Shares Index.

7
was also less apparent for the years of high inflation and more apparent for the
years with lower inflation.

Martikainen and Puttonen (1996) investigated the day-of-the-week phenomenon in

the Finnish stock markets. They used the FOX-index and the time period was from
1989 to 1990. They documented that the average return was negative and
statistically significant on Tuesdays and Wednesdays. Therefore, their results are
similar to the results documented by Jaffe and Westerfield with negative Tuesday
returns (1985)9.

2.2.1 Studies on the Emerging Markets

Brooks and Persand (2001) examined the evidence for the Day of the week effect in
five Southeast Asian stock markets including Taiwan, South Korea, the Philippines,
Malaysia and Thailand. The time period was from 1989 to 1996 and indices used in
the study were the main stock index in each country.

They found that neither South Korea nor the Philippines had significant calendar
effects. Instead both Thailand and Malaysia had significant positive average returns
on Monday and significant negative average returns on Tuesday. In addition they
also documented a significant negative Wednesday effect in Taiwan.

Demirer and Baha Karan (2002) examined the possible existence of the calendar
effects in the Istanbul Stock Exchange. The time period was from 1988 to 1996.
Although all returns seemed to be consistently high, they could not find any
supporting evidence of the Day of the week effect. Only significant finding was when
they tested the autoregressive model that the lag variable was consistently highly
significant. This implicated that yesterday’
s return was a signal for today’
s return
and therefore implicated the market inefficiency.

Ajayi & al. (2004) found more evidence of the Day of the week effect on emerging
markets. Their paper covered eleven major stock market indices on Eastern Europe

9
Martikainen and Puttonen studied also the day of the week affect on the Finnish derivatives markets.
They found that there was also a strong negative Monday effect on both options and futures markets.

8
during the time period roughly from the mid-1990s to 2002. Their empirical results
indicated negative Monday returns in six of the twelve markets and positive Monday
returns in the remaining five. However, two of the six negative Monday returns
(Estonia and Lithuania) and only one of the five positive Monday returns (Russia)
were statistically significant.

Al-Saad and Moosa (2005) studied monthly patterns on Kuwait stock markets using
the Global Market Index of the Kuwait Stock Exchange. They found that over a
sample period from 1984 to 2000 returns were significantly higher on July compared
with the other months, therefore creating a July effect rather than January effect.

Kumari and Mahendra (2006) studied day of the week effect and other market
anomalies in the Indian Stock Market over a period from 1979 to 1998 both in The
Bombay Stock Exchange and in the National Stock Exchange. They found that the
Monday returns were higher compared with the other days of the week but on the
other hand the returns on Tuesday were negative. In the case of monthly returns
they documented that the returns in April were significantly higher and different from
the rest of the months.

More empirical evidence of day of the week effect on emerging stock markets is
documented e.g. by Basher and Sadorsky (2006) when they investigated 21
emerging stock markets around the world10. The data covered the period 1992-
2003. However, they documented little evidence of the time patterns. They found
that there was the Day of the week effect only in three counties (Philippines,
Pakistan and Taiwan) out of all 21 countries. Taiwan had a positive Friday effect,
Pakistan had a negative Tuesday effect and the Philippines had a positive Tuesday
effect. These results differ from those documented by Brooks and Persand (2001)
because they did not document any anomaly for the Philippines. Chen et al. (2001)
studied the Day of the week anomaly in the stock markets of China over a period
from 1992 to 1997. Their results showed only a negative Tuesday effect after 1995.

10
For more detailed information of the countries see Basher, S. A. – Sadorsky, P.: “Day-of-the-week
effects in emerging stock markets”. Applied Economics Letters, 2006, no. 13, 621-628.

9
2.2.2 Other studies

There are some papers that have documented calendar patterns on bond markets
as well. Gibbons and Hess (1981) tested the Day of the week effect on US Treasury
bill market during 1962-1968. They found similar patterns to stock returns. The
returns on Mondays were on average lower and the returns on Wednesdays were
on average higher than other days of the week.

Jordan and Jordan (1991) studied calendar effects in corporate bond returns using
the Dow Jones Composite Bond Average. The research covered a time period from
1963 to 1986. They documented similar results to Hess and Gibbons (1981) with
lower Monday returns and higher Wednesday returns. In addition they studied the
returns behavior across the month and noted that the highest returns occurred in
week 2 and the week 4 had the lowest returns.

They documented also some evidence of the January effect. Based on analyses of
different sub periods they found that, the seasonal patterns were weaker in the later
years of the sample. Actually the only significant exception against the general
weakening of seasonal effects was the week-of-the-month behavior of the bond
index.

Recently Nippani and Arize (2007) reexamined U.S. corporate bond market for
calendar anomalies using three different indices. The sample period was 1982-
2002. Their analysis covered the entire corporate bond market and also two broad
industry classes, utilities and industrials. They found that the Monday returns were
significantly lower compared with the average returns for the rest of the week which
was different to the results of earlier research made by Jordan and Jordan (1991).

Maxwell (1998) studied the strength and causes of the January effect in the US
corporate bond market over the period of roughly from 1987 to 1997. The data
covered noninvestment-grade category and the lowest investment-grade category
bond indices. He documented a statistically significant January effect for
noninvestment-grade bond indices. He also found a positive excess return in
January for the lowest investment grade category, but the results were not

10
statistically significant. In addition he documented that the excess returns of the
bonds in January increased as the credit quality decreased.

As we can see from the previous studies calendar effects have existed already
many years in international finance. These effects are found across the equity
markets and across the other assets like bonds as well. In addition, several papers
have documented shifts or changes in these traditional patterns. On the other hand,
we have also seen some evidence that at least on some more developed markets
these anomalies have declined or even disappeared over time. However, a number
of researchers have tried to explain these patterns and in the next section we will
take a closer look at some of these explanations.

2.3 Possible factors explaining the time patterns

It is difficult to give an exact explanation why these kinds of patterns exist in security
returns. Elton and Gruber (1995) suggest that because hundreds of researchers
study the same data, it is possible that patterns will be found and these patterns are
random. On the other hand, if this is true then similar patterns should not exist on
other markets. Another possible explanation is that markets are inefficient because
we could expect patterns to disappear as investors exploit them. In some of the
cases the explanation might also be the transaction costs. Tong (2000) suggests
that the negative Monday effect is probably a response of individual investors to bad
news received on Friday.

Keef and McGuinness (2001) propose that the settlement procedures might cause
the negative Monday effect. They discovered this when they studied weekday
returns of the New Zealand market. This explanation is later supported also by e.g.
Kumari and Mahendra (2006). However, it is good to bear in mind that this
suggestion overlooks the fact that settlement procedures may differ across the
countries.

Rystrom and Benson (1989) suggest that one explaining factor behind the Day of
the week effect might be investor psychology. They point out that investors may
sometimes act irrationally and therefore their economic decisions may be influenced

11
by moods, emotions etc. And if these moods differ across the days of the week it
can very well produce differing degrees of optimism and pessimism across the days
of week, hence differing returns to assets. Rystrom and Benson argue that if
investors feel more pessimistic on Mondays than on other days of the week, they
sell their securities and depress prices. In contrast, on Fridays optimistic investors
buy securities and create upward pressure in prices.

Pettengill (2003) provides a similar explanation which arises also from the behavior
of individual investor. He suggests that investors avoid buying securities on
Mondays because they are afraid of the potential loss from trading with well
informed traders who might be selling based on unfavorable information they have
received during the weekend.

Condoyanni & al. (1987) have used the time-zone theory to explain the Tuesday
effect. They pointed out that the information on US equity markets may affect to the
other markets after US market has closed on Mondays. Therefore, they assume that
the negative Tuesday effect in some countries is a reflection of the US Monday
effect11. Also Jaffe and Westerfield (1985) used this theory to partly explain their
findings.

The existence of January effect has been explained by the tax-selling hypothesis. It
suggests that investors choose to sell some of their securities right before the end of
the year in order to realize capital losses for tax purposes. This pressure causes
that the prices go down at the end of the year. In January when this downward
pressure is relieved securities rise back up to their equilibrium values creating
higher returns. (Elton-Gruber, 1995) According to this explanation Ritter (1988)
suggests that investors save some proceeds from the sales at the end of the year
and they are not immediately reinvested. Instead investors wait until January and
invest their money then creating upward pressure on the prices.

Another similar explanation for January effect is given by Sharpe & al. (1999). They
suggest that the reason for high returns in January is so called “window dressing”.
11
Because of the time zones trading occurs at different hours on US markets, therefore the returns in
European markets cannot be influenced by the behavior of the US markets at the same day.

12
This means that at the end of the year some professional fund managers decide to
sell those stocks that have performed badly during the year in order to avoid their
existence in annual reports. At the beginning of the year managers buy a lot of
stocks that have performed extremely well in order to make their fund attractive for
investors.

Schallheim and Kato (1985) suggest that at least on the Japanese stock markets
the January effect can be partly explained by bonus payments for employees12.
They argued that most Japanese companies pay large bonuses in December and
they assumed that a great part of the bonuses is still available for investing in
January. The explanation suggested by Kato and Schallheim is a bit similar to the
one suggested by Ritter previously. As another explanation they suggested the
release of information might also partly cause the January effect. For example, year-
end financial reports might create the January effect. This explanation sounds
rational because if the news has been good then it should affect the prices and the
returns in a positive way.

12
Schallheim and Kato found that there were a positive correlation between the January effect and
the bonus payments.

13
3. DATA AND METHODOLOGY

3.1 Index descriptions

For testing the seasonal patterns we use the main stock market indices in each
country. The IPC Index is the main index for the Mexican Stock Exchange. It has
compounded since 1978 and it reliably portrays the stock market situation. At the
moment it covers the 35 biggest and most traded companies on the market.

For Argentina we use the Merval Index which is the main indicator in the Buenos
Aires Stock Exchange. It consists of the 24 most liquid companies on the stock
exchange. In Brazil we use the Bovespa Index. That is the main indicator of the
Brazilian stock market. The Bovespa Index uses 50 most liquid companies of the
market and altogether they account for around 70% of the whole market
capitalization. Finally, the IGPA Index which covers majority of the market is used to
measure the stock market performance in Chile in the Santiago Stock exchange.

3.2 Data and its features

The data for this thesis is collected from DataStream system. It covers the main
stock market indices in Latin America including the following four markets: Brazil,
Mexico, Argentina and Chile. All the values of the indices are in local currency13.
The full sample period in our analysis covers the period from 1.1.1997 to
31.12.2006. The first sub-period means the period of 1.1.1997-31.12.2001 and
respectively the second sub-period is from 1.1.2002 to 31.12.2006.

We use daily returns for testing the Day of the week effect and monthly returns for
testing the January effect, respectively. Based on the data of each index, we
calculate continuously compounded returns for each index. For example Vaihekoski
(2004, p.194) suggests that continuously compounded returns follow better the
normal distribution. Both daily and monthly returns for the indices are computed as
follows:

13
Argentine Peso, Brazilian Real, Chilean Peso and Mexican Peso are considered.

14
  P 
Rit = ln  t  (1)
 Pt −1 

where Rt is the return of stock index i at time t and Pt and Pt-1 are the closing values
at time t and t-1 for the same index.

Table 1 presents the descriptive for the daily data covering first the whole time
period from 1996 to 2006 and the both sub-periods first from 1997 to 2001 and then
from 2002 to 2006. In general every equity index has a positive daily mean return
but all of them are quite low. Standard deviation ranges from 0.5% to around 2%.
The first sub-period from 1997 to 2001 seemed to be a bit more volatile than the
second one. The returns in Argentina appeared to be the most volatile for all
periods. One reason for this could the economical crisis that took place in Argentina
at the turn of the 21st century. In general volatility seemed to be quite low because
there would be reason to suspect that on emerging markets return volatility is high.
However, this does not seem to be the case in these countries.

Returns seem to be quite negatively skewed. This implicates that those indices have
had more negative values than positive ones. However, Vaihekoski (2004, 197)
points out that negative skewness is a common feature for equity indices. When we
take a look at the kurtosis we note that it is quite high for every index. This might
implicate that majority of the returns is close to the mean (Vaihekoski 2004, 197).
We tested the normality of each series by applying the Bera-Jarque test which is
commonly used method in normality testing. The test shows that the null hypothesis,
which suggests that the series are normally distributed is rejected at 0.01
significance level for each index for all time periods14. One explanation might be the
high kurtosis in each series. Autocorrelation and its statistical significance are
measured by Box-Ljung-test. Table 1 indicates that during almost all the periods
there appears positive autocorrelation in returns for Argentina, Chile and Mexico at
1% risk level. This positive autocorrelation means that yesterday’
s positive return

14
The critical Chi-Square value at 0.05 level with 2 degrees of freedom is 5.991 and the critical value
at 0.01 level is 9.210 respectively.

15
follows again positive return and vice versa. One reason for autocorrelation might be
thin trading, at least in the case of Chile and in Argentina during the crisis.

Table 1. Descriptive statistics for daily data

Descriptive statistics are for daily returns on the whole sample period and then for both sub-periods.
In the table are shown number of observations (N), mean, standard deviation, skewness and
kurtosis. Series normality is tested by Bera-Jarque test (B-J). Autocorrelation (Autoc.) is tested by
Box-Ljung-test. * Indicates statistical significance at 0.01 level.

Country N Mean Std.Dev Skewness Kurtosis B-J Autoc. Ljung-

Box
Argentina
2608 0.0004 0.0225 -0.1127 8.5671 3373.41* 0.073 13.896*
1997-2006
Brazil
2608 0.0007 0.0226 0.4324 18.3484 25680.34* 0.033 2.822
1997-2006
Chile
2608 0.0003 0.0065 -0.0373 7.0835 1812.70* 0.302 237.94*
1997-2006
Mexico
2608 0.0007 0.0157 -0.0439 10.5255 6155.04* 0.094 23.033*
1997-2006

Argentina
1304 -0.0006 0.0244 -0.1530 8.6673 1750.24* 0.061 3.797
1997-2001
Brazil
1304 0.0005 0.0273 0.5573 16.7801 10384.97* 0.028 1.036
1997-2001
Chile
1304 0.0001 0.0076 0.0770 6.5891 701.19* 0.232 134.16*
1997-2001
Mexico
1304 0.0004 0.0190 -0.0156 9.0920 2016.52* 0.091 12.820*
1997-2001

Argentina
1304 0.0015 0.0204 0.0245 7.5935 1146.61* 0.082 9.596*
2002-2006
Brazil
1304 0.0009 0.0166 -0.2265 3.7938 45.39* 0.045 2.676
2002-2006
Chile
1304 0.0006 0.0052 -0.2065 4.7108 168.29* 0.251 86.689*
2002-2006
Mexico
1304 0.0010 0.0115 -0.0166 5.4421 324.10* 0.078 4.979
2002-2006

Table 2 presents the descriptive statistics for monthly returns first covering the
whole sample period from 1997 to 2006 and the both sub-periods from 1997 to 2001
and from 2002 to 2006. Again we can see that on average the returns have been
positive on all periods but on the second sub-period they have been at the highest.
Standard deviation ranges from 3 % to almost 14% when we take a look at all
periods.

16
The second sub-period seems to be the most volatile. Again we can note that the
returns have been the most volatile in Argentina during all the time periods. In
general returns seem to be quite negatively skewed like on the daily data. Table 2
shows also that the monthly returns are in general less kurtosis compared to daily
returns. Bera-Jarque test shows again that either the monthly returns are not so
normally distributed. Only the returns for Brazil, Chile and Mexico on the second
sub-period seem to be normally distributed at 1% level. Again, one reason for non-
normality could be the kurtosis. On monthly basis returns does not seem to be auto
correlated.

Table 2. Descriptive statistics for monthly data

Descriptive statistics are shown for monthly returns on the whole sample period and then for both
sub-periods. In the table are shown number of observations (N), mean, standard deviation, skewness
and kurtosis. Series normality is tested by Bera-Jarque test (B-J). Autocorrelation (Autoc.) is tested
by Box-Ljung-test. * Indicates statistical significance at 0.01 level.

Country N Mean Std.Dev Skewness Kurtosis B-J Autoco. Box-

Ljung
Argentina
120 0.0097 0.1169 -0.2837 6.4090 59.71* 0.061 0.573
1997-2006
Brazil
120 0.0153 0.1050 -1.3269 7.0857 118.68* 0.052 0.369
1997-2006
Chile
120 0.0077 0.0477 -1.0789 8.5874 179.38* 0.071 0.712
1997-2006
Mexico
120 0.0171 0.0773 -1.0660 6.0977 70.70* 0.070 0.600
1997-2006

Argentina
60 -0.0131 0.1317 -0.3279 6.0029 23.61* -0.047 0.138
1997-2001
Brazil
60 0.0109 0.1288 -1.2948 5.8607 37.22* 0.068 0.288
1997-2001
Chile
60 0.0016 0.0587 -1.0308 6.8061 46.84* 0.012 0.008
1997-2001
Mexico
60 0.0106 0.0980 -0.8130 4.3961 11.48* 0.120 0.902
1997-2001

Argentina
60 0.0326 0.0957 0.4501 5.2442 14.61* -0.082 0.471
2002-2006
Brazil
60 0.0197 0.0750 -0.4788 2.9542 2.29 -0.019 0.021
2002-2006
Chile
60 0.0138 0.0328 0.3961 3.0854 1.58 0.206 2.687
2002-2006
Mexico
60 0.0237 0.0488 -0.7909 3.1603 6.32 0.056 0.200
2002-2006

17
3.2 Methodologies

According to the Day of the week effect there appear some systemic patterns in the
stock returns depending on the day. Therefore we test if the daily returns are
statistically different from each other. Basically we do this by using Eviews program
and the linear regression model and the ordinary least squares-method (OLS).
Brooks (2002) suggests several assumptions for the classical linear regression
model. They include e.g. that the residuals are homoscedastic and that there is no
autocorrelation in residuals. If these assumptions are not filled the more appropriate
method could be to use for example GLS procedure15. However, in this thesis we
leave these assumptions and we use the OLS-method, because it has been largely
used in anomalies testing. For example Gibbons and Hess (1981) and Ajay et al.
(2004) used this method. Also Brooks (2002, 537-539) suggests that this is the
basic method for studying calendar anomalies. To examine whether there exist any
Day of the week effect, we employ the following model:

Rit = α1i D1t + α 2i D2t + α 3i D3t + α 4i D4t + α 5i D5t + vit (2)

In the model Rit is the return of the index on day t, D1t is a dummy variable for
Monday taking the value of 1 for all Monday observations and zero otherwise. D2t is
a dummy variable for Tuesday taking the value of 1 for all Tuesday observation and
zero otherwise and so on. The is the coefficient that is estimated for each day of
the week from Monday through Friday. Vit is the disturbance term.

We want to study, if the stock returns vary of each others depending on the day of
the week and if they are statistically significant. Therefore we can consider the null
hypothesis (Ho ) as follows:

H o = α1 = α 2 = α 3 = α 4 = α 5 = (0 ) (3)

As we can see, our assumption is that returns for each day of the week do not
statistically differ from each others. Therefore the estimates for alpha should be 0 or

15
For more information about regression analysis see e.g. “Introductory to econometrics in Finance”
by Chris Brooks, 2004.

18
close to 0. In addition the F-value should not be statistically significant16. If we reject
the null hypothesis then the stock returns have to exhibit some form of day of the
week seasonality and the F-value becomes statistically significant.

Similarly for testing the monthly patterns we construct almost an identical model.
This model has been used e.g. by Mehdian and Perry (2001). Therefore, we employ
the following regression:

Rit = α1i D1 + α 2i D2 + α 3i D3 +,...,+α10i D10 + α11i D11 + α12 i D12 + vit (4)

where Rit is the monthly return of the index i as defined earlier in equation 1, D1
through D12 are dummy variables for each month of the year such that D1 takes a
value of 1 for all January observations and zero otherwise and so on. The
coefficients from 1 through 12 are estimates of the return for each month from
January through December. Vit is the disturbance term. Again we can consider our
null hypothesis as follows:

H 0 = α 1 = α 2 = α 3 ,..., = α 10 = α 11 = α 12 = (0) (5)

Again, we want to test if stock returns in e.g. January differ from the returns in other
months. We reject the null hypothesis if we find some form of monthly seasonality
that is statistically significant.

16
F-test is used for testing multiple hypotheses.

19
4. RESULTS
In this section we present the empirical results of our analysis. First we cover the
results based on daily data for the full sample period and then separately for each
sub-period. Then we show the results based on monthly data, again at first for the
whole time period and then finally for both sub-periods.

4.1 Results for daily data for the full sample period

Table 3 presents the results of the regression analysis based on the daily data for
the full sample period. Our results indicate that there has not been any statistically
significant day of the week pattern in stock returns during 1997-2006 in Argentina.
For example the coefficient for Monday is negative but it is far away from being
statistically significant. Therefore the null hypothesis of the equal return distribution
can not be rejected.

Instead for Brazil we can see the daily return for Friday has been statistically higher
compared with the other days of the week at 1% risk level. The F-value and its p-
value also indicate that all coefficients are not zero. Therefore we can reject the null
hypothesis at 1% level and confirm the positive Friday effect in Brazil during the full
sample period.

For Chile we see that the negative coefficient for Monday returns is statistically
significant at 1% risk level. In addition we can also note positive and statistically
significant coefficients at 1% risk level for Wednesday and Friday as well. The F-
value for the all coefficients confirms that they are not all zero and again we can
reject the null hypothesis for all coefficients being equal at 1% risk level for Chile.

When it comes to Mexico our results indicate positive coefficient for Wednesday at
1% risk level. When we take a look at the F-value and its probability we can reject
our null hypothesis at 1% level and document statistically significant Wednesday
return for Mexico.

20
 Table 3. Results for daily data on the full sample period 1997-2006

Results of the regression analysis are shown on the full sample period 1997-2006. For each index are shown the estimated coefficient, t-value and p-value.
The existence of the Day of the week effect is measured by F-value. * Indicates statistical significance at 0.01 level and ** at 0.05 level.

Monday Tuesday Wednesday Thursday Friday F- p-

Country 1 2 3 4 5 value value

Argentina coefficient -0.0005 0.0006 0.0009 -0.0001 0.0014 0.7511 0.5851

t-value -0.6026 0.6247 0.9329 -0.1389 1.4534
p-value 0.5468 0.5322 0.3509 0.8895 0.1462
Brazil coefficient -0.0006 0.0015 0.0016 -0.0017 0.0027 3.3601 0.0050*
t-value -0.6899 1.5334 1.6799 -1.7784 2.8262
p-value 0.4903 0.1253 0.0931 0.0754 0.0047*
Chile coefficient -0.0009 0.0001 0.0007 0.0005 0.0012 8.2315 <0.0001*
t-value -3.1874 0.3786 2.6987 1.8199 4.5002
p-value 0.0015* 0.7050 0.0070* 0.0689 <0.0001*
Mexico coefficient -0.0003 0.0010 0.0017 0.0008 0.0005 2.2700 0.0045*
t-value -0.4447 1.5867 2.5153 1.2971 0.7907
p-value 0.6565 0.1127 0.0120** 0.1947 0.4292

21
4.2 Results for daily data for the sub-periods

Table 4 presents the results for the first sub-period 1997-2001. Again we can see
that there is not any sign of the Day of the week effect in Argentina during the first
sub-period. All coefficients and their p-values and F-value are too low for being
statistically significant.

For Brazil the coefficients for Tuesday, Wednesday and again for Friday seem to be
all positive and statistically significant at 1% risk level. Based on the F-value for
Brazil we can again reject our null hypothesis because it seems to be significant at
5% risk level and confirm these anomalies.

For Chile the coefficient for Friday seems to be positive and statistically significant at
1% risk level. The F-value also indicates that we can reject again our null hypothesis
for Chile at 1% level. For Mexico we can see that the positive coefficient for
Wednesday is just statistically significant at 5% risk level. However, based on the F-
value, we can not reject our null hypothesis. Therefore, there did not appear any day
of the week anomaly in Mexico during the first sub-period.

In table 5 we present the results for the second sub-period 2002-2006. In Argentina
the coefficient for Friday seems to be significant at 5% risk level. The F-value also
allows us to reject our null hypothesis at 10% risk level.

For Brazil we can see that the coefficient for Wednesday is statistically significant at
5% level and the coefficient for Friday is statistically significant at 1% level. The F-
value is also statistically significant and we can reject our null hypothesis. Compared
with the results from the first sub-period the positive Wednesday and Friday effects
still remained in Brazil. But instead it seems that the Tuesday effect documented
earlier seems to have disappeared during the second sub-period.

When it comes to Chile at first we can note the negative coefficient for Monday that
is statistically significant at 5% risk level. In addition there are also positive and
statistically significant coefficients for Thursday and Friday, both at 1% level. The F-

22
value rejects our null hypothesis at 1% risk level and we can confirm the anomalies
for Chile. Compared with the results from the first sub-period the Friday effect still
exists but in addition we also found the negative Monday effect and the positive
Thursday effect on the second sub-period. These results for Chile, from the second
sub-period are almost similar to the results from the full sample period. Therefore
we can say that the second sub-period has effected more on the full sample period.

Finally for Mexico the coefficient for Thursday is statistically significant at 5% risk
level. The F-value is also statistically significant at 5% level and therefore we can
reject our null hypothesis the equality of the coefficients and document the Thursday
anomaly. This differs from the results we documented for the first sub-period
because then we did not find any evidence of Thursday anomaly. It is also possible
that it has changed over time.

As a conclusion we can think what these a bit mixed findings might mean. For
Argentina we found the Friday anomaly only during the second sub-period. One
explanation could be again that the capital markets were less efficient during 2002-
2006. This might be possible for example because of the economic crisis that took
place in Argentina during the early years of 21st-century. This crisis had serious
implications on the Argentinean capital markets as well. In Brazil the markets
seemed to be a bit more efficient during the second sub-period because the
Tuesday effect seemed to disappear. In Chile, there appeared three different
anomalies mainly during the second sub-period. Well, again we can think that the
markets are inefficient. But on the other hand we can think that the markets in Chile
are smaller compared with the other markets studied in this paper. Therefore, one
factor causing the daily anomalies in Chile might be the low liquidity. Also the crisis
in Argentina might have had implications in Chile. In Mexico markets might have
been a bit more inefficient during the second sub-period. Because for the second
sub-period we found the Thursday effect but on the first sub-period there did not
exist any time pattern.

23
 Table 4. Results on the first sub-period 1997-2001

Results of the regression analysis are shown on the period 1997-2001. For each index are shown the estimated coefficient, t-value and p-value. The
existence of the Day of the week effect is measured by F-value. * Indicates statistical significance at 0.01 level and ** at 0.05 level.

Monday Tuesday Wednesday Thursday Friday F- p-

Country 1 2 3 4 5 value value

Argentina coefficient 0.0010 0.0020 0.0017 <-0.0001 0.0023 0.6345 0.6763

t-value 0.5023 1.0025 0.8731 -1.5838 1.1698
p-value 0.6155 0.3162 0.3827 0.1135 0.2423
Brazil coefficient 0.0037 0.0059 0.0047 <0.0001 0.0068 2.2629 0.0461**
t-value 1.6217 2.5989 2.0793 -1.5302 3.0147
p-value 0.1051 0.0095* 0.0037* 0.1150 0.0026*
Chile coefficient -0.0007 0.0006 0.0005 <0.0001 0.0018 3.3042 0.0057*
t-value -1.1981 0.1022 0.8909 -0.7118 2.8602
p-value 0.2311 0.9186 0.3731 0.4767 0.0043*
Mexico coefficient -0.0006 0.0015 0.0031 <-0.0001 0.0009 1.2714 0.2735
t-value -0.3804 0.9783 1.9685 -0.7148 0.5864
p-value 0.7037 0.3281 0.0492** 0.4748 0.5567

24
 Table 5. Results on the second sub-period 2002-2006

Results of the regression analysis on the second sub-period 2002-2006. For each index are shown the estimated coefficient, t-value and p-value. The
existence of the Day of the week effect is measured by F-value. * Indicates statistical significance at 0.01 level, ** at 0.05 level and *** at 0.10 level.

Monday Tuesday Wednesday Thursday Friday F- p-

Country 1 2 3 4 5 value value

Argentina coefficient -0.0007 0.0013 0.0022 0.0014 0.0025 1.9269 0.0871***

t-value 0.0586 1.0370 1.7576 1.1499 2.0357
p-value 0.9532 0.2999 0.0079 0.2504 0.0420**
Brazil coefficient -0.0012 0.0009 0.0024 -0.0001 0.0025 2.8451 0.0146**
t-value -1.2406 0.8813 2.3796 -0.1076 2.4970
p-value 0.2150 0.3783 0.0175** 0.9143 0.0012*
Chile coefficient -0.0008 0.0004 0.0012 0.0012 0.0010 10.1093 <0.0001*
t-value -2.5446 1.3129 1.0094 4.0364 3.1530
p-value 0.0110** 0.1894 0.3219 0.0001* 0.0017*
Mexico coefficient 0.0006 0.0013 0.0011 0.0014 0.0008 2.4553 0.0317*
t-value 0.9091 1.8342 1.5435 2.0479 1.2285
p-value 0.3635 0.0669 0.1229 0.0408** 0.2195

25
4.3 Results for monthly data for the full sample period

Table 6 shows the results based on monthly data for the full sample period. For
Argentina the coefficients in January and in December seem to be statistically
significant at 10% risk level. Other months does not seem to have any statistically
significant coefficients. However, based on the F-value we can not reject our null
hypothesis and therefore we are not able to confirm January and December
anomalies in Argentina during the full sample period.

Similarly, in Brazil the coefficients for November and December are statistically
significant. In November at 5% risk level and respectively in December, at 10%
level. However, again based on the F-value we can not reject our null hypothesis.
When we take a look at Chile, we note that there do not appear any statistically
significant coefficients during the full sample period. In Mexico the coefficient for
December is significant at 5% risk level. But again we can not reject our null
hypothesis because the F-value is not statistically significant. Therefore we do not
document any monthly anomaly during the full sample period.

26
 Table 6. Results on the full sample period 1997-2006

Results of the regression analysis are shown for monthly data on the full sample period 1997-2006.
For each index are shown the estimated coefficient for each month, t-value and p-value. F-value
measures the equality of coefficients. ** Indicates significance at 0.05 level and *** at 0.1 level

Month Argentina Brazil Chile Mexico

Jan coefficient 0.0731 0.0296 0.0004 0.0204

t-value 1.9822 0.8949 0.0282 0.8348
p-value 0.0500*** 0.3728 0.9775 0.4056
Feb coefficient 0.0178 0.0423 0.0211 0.0275
t-value 0.4829 1.2782 1.3672 1.1234
p-value 0.6301 0.2039 0.1744 0.2637
Mar coefficient 0.0030 0.0221 0.0156 0.0214
t-value 0.0820 0.6693 1.0104 0.8765
p-value 0.9348 0.5047 0.3145 0.3827

Apr coefficient 0.0082 -0.0002 0.0090 0.0135

t-value 0.2240 -0.0088 0.5839 0.5516
p-value 0.8232 0.9930 0.5605 0.5823

May coefficient -0.0538 -0.0161 0.0077 -0.0136

t-value -1.4586 -0.4863 0.5025 -0.5576
p-value 0.1476 0.6277 0.6163 0.5782

Jun coefficient 0.0044 0.0135 0.0039 0.0342

t-value 0.1195 0.4097 0.2581 1.3955
p-value 0.9050 0.6828 0.7968 0.1657
Jul coefficient -0.0022 -0.0037 0.0144 -0.0007
t-value -0.0609 -0.1117 0.9337 -0.0320
p-value 0.9515 0.9112 0.3525 0.9745
Aug coefficient -0.0515 -0.0456 -0.0111 -0.0359
t-value -1.3980 -1.3754 -0.7202 -1.4670
p-value 0.1650 0.1718 0.4729 0.1453
Sep coefficient 0.0265 -0.0087 -0.0043 0.0277
t-value 0.7184 -0.2628 -0.2821 1.1307
p-value 0.4740 0.7932 0.7784 0.2607
Oct coefficient 0.0181 0.0145 0.0067 0.0259
t-value 0.4907 0.4399 0.4335 1.0561
p-value 0.6246 0.6608 0.6655 0.2932
Nov coefficient 0.0061 0.0783 0.0287 0.0318
t-value 0.1658 2.3630 1.8586 1.2994
p-value 0.8686 0.0199** 0.0658 0.1966
Dec coefficient 0.0671 0.0580 0.0002 0.0539
t-value 1.8208 1.7494 0.0158 2.2000
p-value 0.0714*** 0.0831*** 0.9874 0.0299**
F-value 1.0349 1.1749 0.7220 1.363872

p-value 0.4227 0.3102 0.7272 0.1945

27
4.4 Results for monthly data for the sub-periods

Table 7 shows the results based on the first sub-period 1997-2001. They are
somewhat similar to the results from the full sample period. For Argentina none of
the months show statistically significant coefficients. In Brazil the coefficient for
August is negative and statistically significant at 5% risk level. However, based on
the F-value the null hypothesis still remains and therefore the negative August is not
an anomaly. Similarly in Chile the coefficient in November is positive and statistically
significant at 10% risk level. But again the F-value indicates that all the coefficients
are quite close to zero and therefore the null hypothesis is not rejected. The same
holds with Mexico. Even though the negative coefficient for August is statistically
significant at 5% level, we can not reject our hypothesis based on the F-value.

Table 8 documents the results for the second sub-period 2002-2006. In Argentina
we can note that the coefficient in January is positive and statistically significant at
1% risk level. In addition the positive coefficient for September is also statistically
significant at 5% level. Both of the coefficients seem to be quite high. The F-value
for Argentina indicates also that the coefficients are different from zero at 5% level.
Therefore we can reject our null hypothesis and confirm the positive January and
September anomalies. In Brazil only the coefficient in November is significant at 5%
risk level. But again the F-value indicates that we can not reject the null hypothesis
for Brazil and there does not exist November anomaly during the second sub-
period.

When it comes to Chile none of the months have statistically significant coefficients.
Also for Mexico the positive coefficient in November is statistically significant at 5%
risk level. The F-value shows also that the coefficients are not zero at 10% level
and therefore we can reject the null hypothesis. All in all there appeared months
with statistically significant coefficients during the all three periods. However, only
during the second sub-period the coefficients were statistically different from zero so
that we see them as monthly anomalies. Again the markets in Argentina seemed to
be a bit more inefficient during the second sub-period.

28
 Table 7. Results for the first sub-period 1997-2001

Results of the regression analysis are shown for monthly data on the first sub-period 1997-2001. For
each index are shown the estimated coefficient for each month, t-value and p-value. F-value
measures the equality of coefficients. ** Indicates significance at 0.05 level and *** at 0.1 level

Month Argentina Brazil Chile Mexico

Jan coefficient 0.0153 0.0688 0.0094 0.0012

t-value 0.2491 1.2174 0.3592 0.0281
p-value 0.8043 0.2294 0.7210 0.9777

Feb coefficient 0.0164 0.0483 0.0125 0.0419

t-value 0.2662 0.8546 0.4764 0.9464
p-value 0.7912 0.3970 0.6359 0.3487
Mar coefficient 0.0057 0.0484 0.0242 0.0262
t-value 0.0935 0.8563 0.9194 0.5920
p-value 0.9258 0.3961 0.3624 0.5566
Apr coefficient 0.0345 0.0061 0.0045 0.0076
t-value 0.5606 0.1088 0.1738 0.1733
p-value 0.5777 0.9138 0.8628 0.8631
May coefficient -0.0465 -0.0244 0.0173 -0.0125
t-value -0.7556 -0.4317 0.6559 -0.2839
p-value 0.4536 0.6679 0.5150 0.7777
Jun coefficient -0.0239 0.0476 -0.0031 0.0573
t-value -0.3888 0.8419 -0.1184 1.2945
p-value 0.6991 0.4040 0.9062 0.2017
Jul coefficient -0.0294 -0.0111 0.0002 -0.0155
t-value -0.4773 -0.1972 0.0077 -0.3500
p-value 0.6353 0.8444 0.9938 0.7278
Aug coefficient -0.1024 -0.1401 -0.0468 -0.0944
t-value -1.6623 -2.4774 -1.7749 -2.1334
p-value 0.1030 0.0168** 0.0822 0.0380**
Sep coefficient -0.0343 -0.0198 -0.0269 0.0197
t-value -0.5568 -0.3500 -1.0216 0.4454
p-value 0.5802 0.7278 0.3121 0.6580
Oct coefficient -0.0365 -0.0312 -0.0094 0.0213
t-value -0.5929 -0.5517 -0.3588 0.4828
p-value 0.5560 0.5837 0.7213 0.6314
Nov coefficient -0.0297 0.0854 0.0530 0.0074
t-value -0.4827 1.5107 2.0104 0.1692
p-value 0.6314 0.1374 0.0500*** 0.8663
Dec coefficient 0.0733 0.0531 -0.0158 0.0674
t-value 1.1899 0.9395 -0.6003 1.5238
p-value 0.2399 0.3521 0.5511 0.1341
F-value 0.540 1.1351 0.8667 0.8741

p-value 0.8773 0.3556 0.5846 0.5776

29
 Table 8. Results for the second sub-period 2002-2006.

Results of the regression analysis are shown for monthly data on the second sub-period 2002-2006.
For each index are shown the estimated coefficient for each month, t-value and p-value. F-value
measures the equality of coefficients. * Indicates significance at 0.01 level ** at 0.05 level and *** at
0.1 level

Month Argentina Brazil Chile Mexico

Jan coefficient 0.1309 -0.0095 -0.0086 0.0397

t-value 3.2193 -0.2842 -0.5641 1.7607
p-value 0.0023* 0.7774 0.5752 0.0846
Feb coefficient 0.0192 0.0363 0.0296 0.0131
t-value 0.4728 1.0843 1.9467 0.5847
p-value 0.6385 0.2836 0.0574 0.5615
Mar coefficient 0.0002 -0.0040 0.0069 0.0167
t-value 0.0071 -0.1212 0.4566 0.7437
p-value 0.9944 0.9040 0.6500 0.4607
Apr coefficient -0.0180 -0.0067 0.0134 0.0193
t-value -0.4428 -0.2009 0.8827 0.8593
p-value 0.6598 0.8416 0.3818 0.3944
May coefficient -0.0610 -0.0078 -0.0017 -0.0147
t-value -1.5018 -0.2329 -0.1168 -0.6552
p-value 0.1397 0.8168 0.9075 0.5155
Jun coefficient 0.0327 -0.0204 0.0111 0.0111
t-value 0.8061 -0.6099 0.7283 0.4926
p-value 0.4242 0.5447 0.4700 0.6245
Jul coefficient 0.0249 0.0037 0.0286 0.0139
t-value 0.6125 0.1118 1.8791 0.6177
p-value 0.5431 0.9114 0.0663 0.5396
Aug coefficient -0.0007 0.0489 0.0245 0.0225
t-value -0.0182 1.4594 1.6124 0.9994
p-value 0.9855 0.1510 0.1134 0.3226
Sep coefficient 0.0873 0.0023 0.0182 0.0357
t-value 2.1472 0.0708 1.1966 1.5847
p-value 0.0369** 0.9438 0.2373 0.1196
Oct coefficient 0.0727 0.0603 0.0228 0.0304
t-value 1.7888 1.7993 1.4998 1.3489
p-value 0.0800 0.0782 0.1402 0.1837
Nov coefficient 0.0419 0.0712 0.0043 0.0562
t-value 1.0322 2.1214 0.2873 2.4942
p-value 0.3071 0.0391** 0.7751 0.0161**
Dec coefficient 0.0610 0.0628 0.0163 0.0404
t-value 1.5010 1.8721 1.0713 1.7923
p-value 0.1399 0.0673 0.2894 0.0794
F-value 2.0995 1.2607 1.3902 1.7126

p-value 0.0349** 0.2723 0.2034 0.0936***

30
5. CONCLUSIONS
In this bachelor’
s thesis we studied calendar anomalies in South America over a
period roughly from 1997 to 2006. Our objective was to provide some sort of
evidence the existence Day of the week effects and the monthly patterns in
Argentina, Brazil, Chile and Mexico and also to provide some information of the
market efficiency.

In our analysis based on the daily data we found that for the full sample period
1997-2006 there was the traditional positive Friday effect in Brazil. For Chile we
found that the returns had been lowest on Mondays. In addition, we also
documented positive returns on Wednesdays and Fridays. In Mexico we also found
that the highest returns appeared on Wednesdays. For Argentina we did not
document any day of the week anomaly.

When we split the data to two sub-periods we found that during the first sub-period
there had not appeared any patterns in Argentina. For Brazil we found again the
positive Friday effect but also we documented positive effects for Tuesday and
Wednesday. In Chile we found that highest returns appeared on Fridays during the
first sub-period. For Mexico we did not report any statistically significant weekday
anomaly. During the second sub-period 2002-2006 we found the positive Friday
effect in Argentina. For Brazil we documented the positive Wednesday and Friday
effects just like on the first sub-period but the Tuesday effect had disappeared. In
Chile we reported the negative Monday effect and positive Thursday and Friday
effects and finally for Mexico we documented the positive Thursday effect.

When it comes to monthly patterns we found little evidence. For both the full sample
period and for the first sub-period we did not document any statistically significant
monthly pattern in any of our countries. Only on the second sub-period we found
that there was the traditional positive January effect in Argentina and also positive
returns seemed to appear in the month of September. In addition, for Mexico we
reported the positive November effect during the second sub-period.

31
In general we can say that the stock markets were a bit more inefficient during the
second sub-period in all countries except in Brazil where one anomaly had
disappeared during the second sub-period. Some of the results might be explained
by market inefficiency. Another factor partly explaining these patterns might be the
economical crisis that hit extremely hard Argentina in the beginning of the 21st-
century. In Chile where the markets are relatively small the lack of liquidity might
have caused partly these patterns. Our results indicate that on daily basis investors
can not really make high profits based on these anomalies, because the coefficients
for each day were quite low. However, based on monthly basis it could be possible
to take advantage of these monthly anomalies. Especially this could be possible in
Argentina, where the coefficients for January and September were high on the
second sub-period.

Our purpose was to provide some form of evidence of the time patterns in South
America and we managed to do it. For further research there are several
suggestions. At first, it would be interesting to take a bit longer sample period and
include more countries. However, the limitation might be the lack of suitable data.
Secondly, it would also be interesting to study more generally known anomalies like
the Holiday effect. Thirdly it could be of interest to test if these patterns can be
explained somehow. For example, it would be reasonable to test if at least some of
these patterns can be explained by asset pricing models.

32
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