New tests of calendar effects on equity and securitized real estate markets
Abstract
We construct two new tests of calendar effects, apply them on 12 stock indices during 1996–2016, and compare the results with that using Hui and Chan (2016)’s method. The results show that the January and Halloween effects are significant for the four western generalized equity indices for small moving-window sizes. Furthermore, the securitized real estate indices show a greater difference in the overall calendar effect between the three methods than the general equity indices do. This study has an implication that a certain sector of the market is riskier than the whole market.
Keyword : calendar effect, Shiryaev-Zhou index, moving-window size, trading strategy, smoothing effect
How to Cite
Hui, E. C., & Chan, K. K. K. (2018). New tests of calendar effects on equity and securitized real estate markets. International Journal of Strategic Property Management, 22(4), 314-336. https://doi.org/10.3846/ijspm.2018.4400
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Brounen, D., & Ben-Hamo, Y. (2009). Calendar anomalies: the case of international property shares. Journal of Real Estate Finance and Economics, 38(2), 115-136. https://doi.org/10.1007/s11146-007-9088-9
Cheung, K. C., & Coutts, J. A. (1999). The January effect and monthly seasonality in the Hang Seng index: 1985-97. Applied Economics Letters, 6(2), 121-123. https://doi.org/10.1080/135048599353753
Du Toit, J., & Peskir, G. (2008). Selling a stock at the ultimate maximum. The Annals of Applied Probability, 19, 983-1014. https://doi.org/10.1214/08-AAP566
Fountas, S., & Segredakis, K. N. (2002). Emerging stock markets return seasonalities: the January effect and the tax-loss selling hypothesis. Applied Financial Economics, 12(4), 291-299. https://doi.org/10.1080/09603100010000839
Gu, A. Y. (2003). The declining January effect: evidences from the US equity markets. The Quarterly Review of Economics and Finance, 43(2), 395-404. https://doi.org/10.1016/S1062-9769(02)00160-6
Hansen, P. (2005). A test for superior predictive ability. Journal of Business & Economic Statistics, 23(4), 365-380. https://doi.org/10.1198/073500105000000063
Hansen, P. R., Lunde, A., & Nason, J. M. (2005). Testing the significance of Calendar Effects. Federal Reserve Bank of Atlanta Working Paper, (2005-02). https://doi.org/10.2139/ssrn.388601
Hardin III, W., Liano, K., & Huang, G. (2005). Real estate investment trusts and calendar anomalies: revisited. International Real Estate Review, 8(1), 83-94.
Hui, E. C. M., & Chan, K. K. K. (2014). The global financial crisis: is there any contagion between real estate and equity markets?. Physica A: Statistical Mechanics and its Applications, 405, 216-225. https://doi.org/10.1016/j.physa.2014.03.008
Hui, E. C. M., & Chan, K. K. K. (2015). Testing calendar effects on global securitized real estate markets by Shiryaev-Zhou index. Habitat International, 48, 38-45. https://doi.org/10.1016/j.habitatint.2015.03.009
Hui, E. C. M., & Chan, K. K. K. (2016). Testing calendar effects of international equity and real estate markets. Journal of Real Estate Finance and Economics, 56(1), 140-158.
Hui, E. C. M., & Chan, K. K. K. (2018a). A new time-dependent trading strategy for securitized real estate and equity indices. International Journal of Strategic Property Management, 22(1), 64-79. https://doi.org/10.3846/1648715X.2016.1260072
Hui, E. C. M., & Chan, K. K. K. (2018b). Optimal trading strategy during bull and bear markets. International Journal of Strategic Property Management, forthcoming.
Hui, E. C. M., & Chan, K. K. K. (2018c). New trading strategies to increase profit by “smoothing effect”. Working paper.
Hui, E. C. M., Wright, J. A., & Yam, S. C. P. (2014a). Calendar effects and real estate securities. Journal of Real Estate Finance and Economics, 49(1), 91-115. https://doi.org/10.1007/s11146-012-9398-4
Hui, E. C. M., Yam, S. C. P, Wright, J., & Chan, K. K. K. (2014b). Shall we buy and hold? Evidence from Asian real estate markets. Journal of Property Investment and Finance, 32(2), 168-186. https://doi.org/10.1108/JPIF-09-2013-0059
Jacobsen, B., & Visaltanachoti, N. (2009). The Halloween effect in US sectors. Financial Review, 44(3), 437-459. https://doi.org/10.1111/j.1540-6288.2009.00224.x
Kang, S. H., Jiang, Z., Lee, Y., & Yoon, S. M. (2010). Weather effects on the returns and volatility of the Shanghai stock market. Physica A: Statistical Mechanics and its Applications, 389(1), 91-99. https://doi.org/10.1016/j.physa.2009.09.010
Keim, D. B. (1983). Size-related anomalies and stock return seasonality: further empirical evidence. Journal of Financial Economics, 12(1), 13-32. https://doi.org/10.1016/0304-405X(83)90025-9
Lean, H. H. (2011). The Halloween puzzle in selected Asian stock markets. International Journal of Economics and Management, 5, 216-225.
Lucey, B. M., & Whelan, S. F. (2002). A promising timing strategy in equity markets. Journal of the Statistical and Social Inquiry Society of Ireland, 31, 74-110.
Maberly, E. D., & Pierce, R. (2004). Stock market efficiency with-stands another challenge: solving the “sell in May/buy after Halloween” puzzle. Econ Journal Watch, 1(1), 29-46.
Malkiel, B. G., & Fama, E. F. (1970). Efficient capital markets: a review of theory and empirical work. Journal of Finance, 25(2), 383-417. https://doi.org/10.1111/j.1540-6261.1970.tb00518.x
Shiryaev, A. N., Xu, Z., & Zhou, X. Y. (2008). Thou shalt buy and hold. Quantitative Finance, 8(8), 765-776. https://doi.org/10.1080/14697680802563732
Sullivan, R., Timmermann, A., & White, H. (2001). Dangers of data mining: the case of calendar effects in stock returns. Journal of Econometrics, 105(1), 249-286. https://doi.org/10.1016/S0304-4076(01)00077-X
Wachtel, S. B. (1942). Certain observations on seasonal movements in stock prices. The Journal of Business of the University of Chicago, 15(2), 184-193. https://doi.org/10.1086/232617
Wong, W. K., Wright, J. A., Yam, S. C. P., & Yung, S. P. (2012). A mixed Sharpe ratio. Risk and Decision Analysis, 3, 37-65.
White, H. (2000). A reality check for data snooping. Econometrica, 68(5), 1097-1126. https://doi.org/10.1111/1468-0262.00152
Yam, S. C. P., Yung, S. P., & Zhou, W. (2012a). A unified ‘bang-bang’ principle with respect to R-invariant performance benchmarks. Theory of Probability and Its Applications, 57(2), 405-414. https://doi.org/10.4213/tvp4457
Yam, S. C. P., Yung, S. P., & Zhou, W. (2012b). Optimal selling time in stock market over a finite time horizon. Acta Mathematicae Applicatae Sinica, 28(3), 557-570. https://doi.org/10.1007/s10255-012-0169-z
Yam, S. C. P., Yung, S. P., & Zhou, W. (2009). Two rationales behind ‘buy-and-hold or sell-at-once’. Journal of Applied Probability, 46, 651-668. https://doi.org/10.1239/jap/1253279844
Almudhaf, F., & Hansz, J. (2011). Systematic equity return patterns in listed European property companies. International Real Estate Review, 14(1), 61-84.
Andrade, S., Chhaochharia, V., & Fuerst, M. (2012). “Sell in May and go away” just won’t go away. Available at SSRN 21 151 97. https://doi.org/10.2139/ssrn.2115197
Barber, B. M., & Odean, T. (2000). Trading is hazardous to your wealth: the common stock investment performance of individual investors. Journal of Finance, 55(2), 773-806. https://doi.org/10.1111/0022-1082.00226
Bouman, S., & Jacobsen, B. (2002). The Halloween indicator, “Sell in May and go away”: another puzzle. The American Economic Review, 92(5), 1618-1635. https://doi.org/10.1257/000282802762024683
Brounen, D., & Ben-Hamo, Y. (2009). Calendar anomalies: the case of international property shares. Journal of Real Estate Finance and Economics, 38(2), 115-136. https://doi.org/10.1007/s11146-007-9088-9
Cheung, K. C., & Coutts, J. A. (1999). The January effect and monthly seasonality in the Hang Seng index: 1985-97. Applied Economics Letters, 6(2), 121-123. https://doi.org/10.1080/135048599353753
Du Toit, J., & Peskir, G. (2008). Selling a stock at the ultimate maximum. The Annals of Applied Probability, 19, 983-1014. https://doi.org/10.1214/08-AAP566
Fountas, S., & Segredakis, K. N. (2002). Emerging stock markets return seasonalities: the January effect and the tax-loss selling hypothesis. Applied Financial Economics, 12(4), 291-299. https://doi.org/10.1080/09603100010000839
Gu, A. Y. (2003). The declining January effect: evidences from the US equity markets. The Quarterly Review of Economics and Finance, 43(2), 395-404. https://doi.org/10.1016/S1062-9769(02)00160-6
Hansen, P. (2005). A test for superior predictive ability. Journal of Business & Economic Statistics, 23(4), 365-380. https://doi.org/10.1198/073500105000000063
Hansen, P. R., Lunde, A., & Nason, J. M. (2005). Testing the significance of Calendar Effects. Federal Reserve Bank of Atlanta Working Paper, (2005-02). https://doi.org/10.2139/ssrn.388601
Hardin III, W., Liano, K., & Huang, G. (2005). Real estate investment trusts and calendar anomalies: revisited. International Real Estate Review, 8(1), 83-94.
Hui, E. C. M., & Chan, K. K. K. (2014). The global financial crisis: is there any contagion between real estate and equity markets?. Physica A: Statistical Mechanics and its Applications, 405, 216-225. https://doi.org/10.1016/j.physa.2014.03.008
Hui, E. C. M., & Chan, K. K. K. (2015). Testing calendar effects on global securitized real estate markets by Shiryaev-Zhou index. Habitat International, 48, 38-45. https://doi.org/10.1016/j.habitatint.2015.03.009
Hui, E. C. M., & Chan, K. K. K. (2016). Testing calendar effects of international equity and real estate markets. Journal of Real Estate Finance and Economics, 56(1), 140-158.
Hui, E. C. M., & Chan, K. K. K. (2018a). A new time-dependent trading strategy for securitized real estate and equity indices. International Journal of Strategic Property Management, 22(1), 64-79. https://doi.org/10.3846/1648715X.2016.1260072
Hui, E. C. M., & Chan, K. K. K. (2018b). Optimal trading strategy during bull and bear markets. International Journal of Strategic Property Management, forthcoming.
Hui, E. C. M., & Chan, K. K. K. (2018c). New trading strategies to increase profit by “smoothing effect”. Working paper.
Hui, E. C. M., Wright, J. A., & Yam, S. C. P. (2014a). Calendar effects and real estate securities. Journal of Real Estate Finance and Economics, 49(1), 91-115. https://doi.org/10.1007/s11146-012-9398-4
Hui, E. C. M., Yam, S. C. P, Wright, J., & Chan, K. K. K. (2014b). Shall we buy and hold? Evidence from Asian real estate markets. Journal of Property Investment and Finance, 32(2), 168-186. https://doi.org/10.1108/JPIF-09-2013-0059
Jacobsen, B., & Visaltanachoti, N. (2009). The Halloween effect in US sectors. Financial Review, 44(3), 437-459. https://doi.org/10.1111/j.1540-6288.2009.00224.x
Kang, S. H., Jiang, Z., Lee, Y., & Yoon, S. M. (2010). Weather effects on the returns and volatility of the Shanghai stock market. Physica A: Statistical Mechanics and its Applications, 389(1), 91-99. https://doi.org/10.1016/j.physa.2009.09.010
Keim, D. B. (1983). Size-related anomalies and stock return seasonality: further empirical evidence. Journal of Financial Economics, 12(1), 13-32. https://doi.org/10.1016/0304-405X(83)90025-9
Lean, H. H. (2011). The Halloween puzzle in selected Asian stock markets. International Journal of Economics and Management, 5, 216-225.
Lucey, B. M., & Whelan, S. F. (2002). A promising timing strategy in equity markets. Journal of the Statistical and Social Inquiry Society of Ireland, 31, 74-110.
Maberly, E. D., & Pierce, R. (2004). Stock market efficiency with-stands another challenge: solving the “sell in May/buy after Halloween” puzzle. Econ Journal Watch, 1(1), 29-46.
Malkiel, B. G., & Fama, E. F. (1970). Efficient capital markets: a review of theory and empirical work. Journal of Finance, 25(2), 383-417. https://doi.org/10.1111/j.1540-6261.1970.tb00518.x
Shiryaev, A. N., Xu, Z., & Zhou, X. Y. (2008). Thou shalt buy and hold. Quantitative Finance, 8(8), 765-776. https://doi.org/10.1080/14697680802563732
Sullivan, R., Timmermann, A., & White, H. (2001). Dangers of data mining: the case of calendar effects in stock returns. Journal of Econometrics, 105(1), 249-286. https://doi.org/10.1016/S0304-4076(01)00077-X
Wachtel, S. B. (1942). Certain observations on seasonal movements in stock prices. The Journal of Business of the University of Chicago, 15(2), 184-193. https://doi.org/10.1086/232617
Wong, W. K., Wright, J. A., Yam, S. C. P., & Yung, S. P. (2012). A mixed Sharpe ratio. Risk and Decision Analysis, 3, 37-65.
White, H. (2000). A reality check for data snooping. Econometrica, 68(5), 1097-1126. https://doi.org/10.1111/1468-0262.00152
Yam, S. C. P., Yung, S. P., & Zhou, W. (2012a). A unified ‘bang-bang’ principle with respect to R-invariant performance benchmarks. Theory of Probability and Its Applications, 57(2), 405-414. https://doi.org/10.4213/tvp4457
Yam, S. C. P., Yung, S. P., & Zhou, W. (2012b). Optimal selling time in stock market over a finite time horizon. Acta Mathematicae Applicatae Sinica, 28(3), 557-570. https://doi.org/10.1007/s10255-012-0169-z
Yam, S. C. P., Yung, S. P., & Zhou, W. (2009). Two rationales behind ‘buy-and-hold or sell-at-once’. Journal of Applied Probability, 46, 651-668. https://doi.org/10.1239/jap/1253279844