The Turn-of-the-Month-Effect : Evidence from Periodic Generalized Autoregressive Conditional Heteroskedasticity (PGARCH) Model
Part of : International Journal of Business and Economic Sciences Applied Research ; Vol.7, No.3, 2014, pages 43-61
Issue:
Pages:
43-61
Author:
Abstract:
The current study examines the turn of the month effect on stock returns in 20 countries.This will allow us to explore whether the seasonal patterns usually found in global data;America, Australia, Europe and Asia. Ordinary Least Squares (OLS) is problematic as it leadsto unreliable estimations; because of the autocorrelation and Autoregressive ConditionalHeteroskedasticity (ARCH) effects existence. For this reason Generalized GARCH models areestimated. Two approaches are followed. The first is the symmetric Generalized ARCH (1,1)model. However, previous studies found that volatility tends to increase more when the stock market index decreases than when the stock market index increases by the same amount. In addition there is higher seasonality in volatility rather on average returns. For this reason the Periodic-GARCH (1,1) is estimated. The findings support the persistence of the specific calendar effect in 19 out of 20 countries examined.
Subject:
Subject (LC):
Keywords:
Calendar Effects, GARCH, Periodic-GARCH, Stock Returns, Turn of the Month Effect
Notes:
JEL Classification: C22, G14
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