Month-of-the-year effects on Romanian capital market before and after the adhesion to European Union

Monthly seasonality in the stock prices returns is among the best known calendar anomalies that affect the capital markets. The knowledge about such calendar patterns could be exploited in building successful investment strategies. However, it was revealed that not all the calendar anomalies were persistent in time. Sometimes, the passage from relative quiet to more turbulent periods caused significant changes in a financial market seasonality. In this paper we investigate the presence of Month-of-the-year effects on the Bucharest Stock Exchange during two periods of time. The first period, from 2000 to 2006, corresponds to the last stages of Romania’s transition to a capitalist system and could be considered as relative quiet for the capital market. The second period, from 2007 to 2012, was marked by sharp changes. The consequences of adhesion to the European Union and the global crisis induced turbulences on the Romanian financial markets. In our analysis we employ daily values of one from the main indexes of the Bucharest Stock Exchange. We use a GARCH model to reveal the monthly seasonality not only on indexes returns but also on the capital market volatility. The results indicate significant changes in the Month-of-the-year effects from the quiet to the turbulent period.