Efficient Marketplace Hypothesis and Market Anomaly

Intercontinental Journal of Economics and Finance

Vol. 2, No . 2; May well 2010

Successful Market Hypothesis and Industry Anomaly: Facts

from Day-of-the Week A result of Malaysian Exchange

Nik Maheran Nik Muhammad & Nik Muhd Naziman Abd. Rahman

Faculty of Business Administration, Universiti Teknologi Mara, Kelantan Kampus Kota Bharu, 15150, Kota Bharu, Kelantan Malaysia

Tel: 60-12-966-5402

E-mail: [email protected] uitm. edu. my

Summary

The actions of prices in the stock market happen to be among a few phenomena that have cut through the boundaries of academic disciplines and still have cumulative analysis evidence comprising almost a century. Today the field of financial market research appears to be at the thrilling stage of " crisis” – previous results are being questioned, and new alternatives are getting proposed. The preliminary proof indicates which the initial assurance in the Efficient Market Speculation (EMH) might have been misplaced. Various anomalies and inconsistent results make EMH fail to illustrate trading businesses in real life. The presence of work schedule anomalies have been documented widely for the last 2 decades in financial market segments. However , for the Malaysian market, scientific analyses on the market anomaly were limited and contradicting. Some studies indicated market particularite exist and some indicated non-exist. Hence, the present study was trying to desired for the answer of next questions: Is the return about common stocks usually allocated, as much as finance theory presumes? How has the volatility of stock results changed after some time? How is a distribution of returns affected by past returns? Generally, it had been found that, day in the week-effect exist in Malaysian Exchange but only for the Monday effect. Keywords: Efficient Market Speculation, Market Anomaly, Day of the week result 1 . Intro

The circulation of comes back on prevalent stocks is one of the

most widely studied in the economic market and

the presence of diary anomalies has become documented thoroughly for the last twenty years. The most common types are the day-of-the week effect and the January effect. Many investigations (e. g. Aggarwal and Rivoli 1989; Cross 1973; French 1980; Keim and Stambaugh, 1984; Rogalski, 1984) has recorded that the division of inventory return different according to the time of the week. For the Malaysian industry, empirical analyses on the day-of-the week result were limited and contradicting. Study by Wong et al. (1992) noted which the day-of-the week effect intended for Malaysian markets showed bad average results on Monday and excessive positive results on Thurs night and Comes to an end. Analyses simply by Anuar and Shamser (1993) and Mansor (1997) substantiated the presence of the day-of-the week effect located by Wong et al. (1992). However , it contradicting with other research of Marashdeh (1994) when he concluded that there was clearly no week effect in the Malaysian currency markets in his sample of examine. Substantial proof supporting the Efficient Marketplace Hypothesis (EMH) also has been documented over the years. EMH states that security rates fully indicate all readily available information and can immediately adapt to the arrival of new info (Adam, 2004). However , since market was closed on both Weekend and Weekend, it was argued that traders cannot do anything with the industry even though they got a few information during the weekend. There may be where the anomalies exist.

The primary idea with this study is to investigate whether the information highly processed over saturdays and sundays will impact the index go back of Kuala Lumpur (i. e. Composite Index (KLCI) at after the opening on Monday). This analyze relates the elements of efficient market hypothesis (EMH) and market abnormality. Thus, the study tried to find out whether the day-of-the week result really is out there in Kuala Lumpur Amalgamated Index. The objectives in the present research was (1) to analyze empirically whether the day time of the week effect can be found in Kuala Lumpur Composite resin Index; and (2) To examine whether variations of the impact...

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Table 1 ) Summary statistic for daily index of KLCI (n=2085)

Statistic

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