Kra, Brinwa

Lu, Xing

Yin, Haiyan

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IUScholarWorks at Indiana University South Bend 
 
 
The Holiday Effect in Africa Stock 
Markets  
  
Kra, Brinwa; Lu, Xing; Yin, Haiyan  
 
 
 
To cite this article: Kra, Brinwa, et al. “The Holiday Effect in Africa Stock 
Markets.” International Journal of Current Multidisciplinary Studies, vol. 5, 
no. 12(A), Dec. 2019, pp. 1206–08. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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* Corresponding author:  Brinwa Kra, 
Judd Leighton School of Business, Indiana University South Bend. 1700 W Mishawaka Ave., South Bend, IN, 46615.
 
International Journal of
Current Multidisciplinary Studies
Available Online at 
Vol. 5,Issue,
 
                                                              
                                                              
 
THE HOLIDAY EFFECT IN AFRICAN STOCK MARKETS
Brinwa
Judd Leighton School of Business, Indiana University South Bend. 1700 W Mishawaka Ave., 
A R T I C L E  I N F O  
 
Received 13th September, 2019 
Received in revised form 11th  
October, 2019 
Accepted 8th November, 2019 
Published online 28th December, 2019 
 
Keywords:  
 
Holiday Anomaly 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INTRODUCTION 
 
The holiday effect is one of the more significant
anomaliesagainst the Efficient Market 
(Fama, 1970), which states that the pricesshould fully reflect 
all available information and no factor should have significant 
power in predicting future stock returns. However, holiday 
effect describes a tendency for a stock market to sh
abnormal risk-adjusted average returns on the final trading 
days before and after an exchange-mandated holidays such as 
New Year andLabor Day. This effect is associated with the 
significant difference between the stock returns of the day that 
precedes or follows the public holidays, and the rest of the 
trading days. Therefore, this anomaly can be beneficial for 
traders, who may change their positions on a security in the 
days leading up to the last trading day, or immediately after a 
holiday.Many previous studies suggest that the holiday effect 
can be explained by the fact that holidays affect a human 
trader’s mood and attitude. Hirshleifer and Shumway (2003) 
studied investors’ mood and found positive abnormal returns 
associated with sunny days or days typically associated with 
good moods. Yuan, Zheng, and Zhu (2006) showed that there 
is a decrease in return on a seven day window around a full 
moon which would supposedly affect investor’s mood. 
Mehran, Meisami, and Busenbark (2012) also found a 
significantly positive relationship between joyful Jewish 
holidays and stock market returns. The holiday effects havetwo 
forms: 
Copyright © 2019 Brinwa Kra, Xing Lu and Haiyan Yin
permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
 
 
 
http://www.journalijcms.com 
12(A), pp.1206-1208,DECEMBER,201
 
 
RESEARCH ARTICLE                              
 
 
 
 Kra, Xing Lu and Haiyan Yin 
 
South Bend, IN, 46615. 
   
 A B S T R A C T  
 
 
This researchinvestigates the holiday effects in the African stock market and found strong 
evidence of pre-holiday effect in one of the most representative market indices. We 
findsignificantly higher returns on the trading day before a public holiday, relative to regular 
trading days. Furthermore, this effect is weakened, both statistically and economically, after 
the inception of financial crisis.  It may signal improvement in the market ef
Africa.    
 
 
Hypotheses (EMH) 
ow 
 the pre-holiday effect, shown byabnormal daily returns 
before the public holidays
 the post-holiday effect, shown by abnormal daily returns 
after the public holidays
 
The holiday effects were identified in many researches based on 
evidence from different countries. Lakonishok and Smidt (1988) 
and Ariel (1990) found significantly higher returns from the pre
holiday trading days. Fabozzi, Ma, an
consistent higher post-holiday and pre
U.S. stock market. Significant holiday effects have also been 
found outside the U.S. The existence of holiday effects in other 
developed countries, such as Japan, United Ki
Singapore, and Spain are documented in research studies by 
Kim and Park (1994), Tan and Wong (1996), Arsad and Coutts 
(1997), Menue and Pardo (2004), and Lucey (2005).
 
However, the significance and magnitude of holiday effects 
vary across different countries.  Cadsby and Ratner (1992) 
found significant holiday effects in only five of ten 
industrialized countries. Hansen, Lunde, and Nason (2005) 
found significant abnormal post
of ten countries in their research. 
 
For investors intending to exploit the festivity anomaly in the 
stock price evolution, it is crucial to analyze its persistence in 
time. Many anomalies disappeared after their publications. For 
instance, Dimson and Marsh (1999) showed that the publication 
of an anomaly could cause its disappearance or reversal. Several 
studies, including Wong, et al (2006), Marquering, et al (2006), 
., This is an open access article distributed under the Creative Commons Attribution License, which 
 
 
 
9 
 
 
 
ficiency in 
 
 
-
d Briley (1994) found 
-holiday returns in the 
ngdom, 
 
-holiday returns in only one out 
 
IJCMS 
Brinwa Kra, Xing Lu and Haiyan Yin, IJCMS, 2019; Vol. 5(A): 1206-1208.  
1207 
 
   
 
 
and Chong, et al (2005) also found changes in the holiday 
effects over time for many stock exchanges.  
 
The search for holiday anomaly in Africa,a fast emerging 
market, should provide important information on the efficiency 
in its financial markets. This information may help stock 
traders and regulatory authorities in improving the 
microstructure of security trading and stock market 
performance.To our best knowledge, our study is the first in 
testing the holiday effect in the African stock markets during 
the financial crisis.  
 
In this paper, the prime focus is to investigate the presence of 
holiday effects in the African Stock Markets. Our data sample, 
including 16 years ranging from 2003to 2019, enables us to 
investigate the holiday effects before and during the crisis 
started in 2008. We intend to answer two questions in this 
paper:  
 
Q1. Is holiday effect significant in the African stock market? 
Q2. How would the financial crisis affect the holiday effect in 
the African stock market? 
 
The remainder of the paper is organized as follows: Section II 
describes the data sample and methods. Section III presents 
and discusses the empirical results. We summarize our findings 
in the last section. 
 
Data and Methodology 
 
Our study includes twovery representative African stock index 
ETFs, as shown in the Table I. All data are collected from 
Yahoo!Finance’s database. The sample periods range from 
2003 to 2019.  
 
Table I Index ETF Descriptions 
 
Data Source: Yahoo! Finance 
 
ETF Tracking Index 
Inception Date in 
Our Sample 
VanEck Vectors 
Africa Index ETF 
(AFK) 
MVIS GDP Africa Index： 
defines country weightings 
based on a country's gross 
domestic product (GDP). 
Jul. 14th 2008 
iShares MSCI South 
Africa ETF (EZA) 
MSCI South Africa 25/50 
Index：large and mid-cap 
equity 
Feb. 7th 2003 
 
Daily market return of the major stock market indices have 
been computed and categorized based the occurrence of global 
financial crisis. The global financial crisis splits the full sample 
into two groups by Sept. 15th 2008, when the bankruptcy of 
Lehman Brothers was announced. 
 
We calculate the returns of the indices using the formula: 
 
Rt = Ln (Pt) – Ln (Pt-1)  
 
where 
 Rt is the return on the day t; 
 Pt is the closing market index price on the day t. 
 
We test pre- and post-holiday effects by forming the regression 
model with dummy variables: 
Rt = α + β1Pre_Holiday + β2Post_Holiday 
where 
 
 Pre_Holiday is a dummy variable which equals one for 
the last trading day before a public holiday and zero 
otherwise; 
 Post_Holiday is a dummy variable which equals one 
for the first trading day after a public holiday and zero 
otherwise. 
 
Empirical Results 
 
Table IIshows the full sample regression results on the entire 
sample. We found the pre-holiday effect is very significant (at 
5% level)with AFK, which tracks the MVISGDP African Index. 
The positive pre-holiday effect is consistent with many previous 
studies in this field. However, the post-holiday effect is not 
significant. At the meantime, the EZA, which focus on stocks in 
the South Africa, doesn’t show any holiday anomaly.  
 
Table II Regression Results 
 
We report the correlation coefficients with significance level 
(** denotes significance at the 5% level, * denotes 10% level), 
t-test results (in parentheses), and p-values (in square brackets) 
for each index. Only significant p-values are reported. 
 
Index Return Coefficient [p-value] 
AFK 
Pre-Holiday .0029[.049]** 
Post-Holiday -.0003 
After Financial Crisis 
Pre-Holiday .0027[.066]* 
Post-Holiday .0000 
EZA 
Pre-Holiday .0016 
Post-Holiday -.0028 
After Financial Crisis 
Pre-Holiday .0008 
Post-Holiday -.0037 
 
We then divide our sample into two groups by Sept. 15th 2008, 
when the bankruptcy of Lehman Brothers was announced, the 
date commonly used as the inception of financial crisis. The 
regression results for the after-financial crisis groupshowa 
weakening pre-holiday effect from the AFK. It may signal 
improved efficiency in the African stock markets after the 
financial crisis. The holiday effect remain insignificant for the 
South Africa’s stock market.  
 
CONCLUSION 
 
In this research, we investigated the holiday effects in the 
African stock market and found strong evidence of pre-holiday 
effect in the most representative market index. Our results 
showsignificantly higher returns on the trading day beforea 
public holiday, relative to regular trading days. Furthermore, we 
found this effect is weakened, both statistically and 
economically, after the inception of financial crisis. This 
weakened holiday effect may signal improvement in the market 
efficiency in Africa. 
 
References 
 
Ariel, R., High stock returns before holidays: Existence and 
evidence on possible causes. Journal of Finance 45(5): 
1611 - 1626. (1990). 
Arsad, Z., Coutts, J. A. (1997), Security price anomalies in 
the London International Stock Exchange. Applied 
Financial Economics 7(5): 455 - 464. 
 
Brinwa Kra, Xing Lu and Haiyan Yin, IJCMS, 2019; Vol. 5(A): 1206-1208.  
1208 
 
   
 
 
Cadsby, C. B. and M. Ratner (1992), Turn-of-the-month 
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Journal of International Money and Finance, 24, 
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Dimson, E. and Marsh, P. (1999), Murphy‘s law and 
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The Holiday Effect in Africa Stock Markets

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