The Effects of Holidays on the Ghanaian Equity Market

Abstract

This thesis sought to determine if the Ghana Stock Exchange (GSE) is a semi-strong efficient market by investigating whether or not the holiday effect exists. This was done by adopting an ARMAX (2, 2) - GARCH (1, 1) model with 𝐺𝐿+ distribution and the results were further used to estimate the VaR and CVaR at 5% significance levels. The data employed were the daily closing prices of the financial main index; GSE-All Shares and GSE-Composite Index (GSE-CI) from the 3rd January, 2007 to 30th December, 2016; a 10-year period. The results from this research show that there is a significant positive pre-holiday effect and a significant positive post-holiday effect which may not be as a result of bearing higher level of risk. These results suggest that investors on the GSE currently trade more on the 7th trading day preceding and on the 7th trading day after a holiday particularly the Farmers day holiday. The associated risk levels for the Farmers day pre-holiday effect was relatively low, however this was not the case for the Farmers day post-holiday effect. The 7th trading day after the Workers day holiday also had a positive and significant returns which was not as a result of risk. The research is important to investors because it will help them to strategize better in order to take advantage of this calendar anomaly discovered on the Ghana Stock Exchange (GSE). Keywords and phrases: ARMAX, calendar anomalies, efficient market hypothesis, GARCH, 𝐺𝐿+ distribution, holiday effect.