Central European Management Journal
Calendar Anomalies, Market Regimes, and the Adaptive MarketHypothesis in African Stock Markets
University of KwaZulu-Natal, South Africa
Purpose: This paper examines the changing behavior of two calendar anomalies in African stock
returns – the month-of-the-year and the intra-month effects – and their implications for the adaptive
market hypothesis (AMH).
Methodology: We applied two-stage Markov switching models (MSMs) instead of the conventional
single state regression model. The sample period includes the daily index return of Nigerian, South
African, Mauritian, Moroccan, and Tunisian stock exchanges from January 1998 to February 2018.
Findings: We found that (i) all the markets except for the Johannesburg Stock Exchange (JSE) have
a higher tendency to be in bearish state than bullish state, (ii) month-of-the-year and intra-month
effects appear in one regime and disappear in another regime, and (iii) the behavior of calendar
anomalies is affected by market conditions and conforms to AMH rather than the efficient market
Practical Implications: We present that (i) calendar anomaly is a characteristic that changes under
different regimes or market conditions in African stock markets, (ii) active investment management
may yield profits for market participants, depending on the market conditions and the anomaly in
question, and (iii) the right approach would be for investors to consider each market with its own
peculiarity even when they are in the same continent.
Originality/Value: The sensitivity of the month-of-the-year and the intra-month effects to market
conditions has not been documented in African stock markets, especially with the use of
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