Turn-of-the-Year Effect in Asia Pacific Stock Markets : New Evidence

This paper examines a well-known seasonal anomaly - the turn-of-the-year (TOY) effect in fifteen Asia Pacific stock indices by using an updated dataset and forward-looking methods. The analysis utilizes daily dataset that spans from January 2000 to December 2018. Applying the Ordinary Least Square (OLS) regression and EGARCH approach, the results of this paper suggest that the TOY effect becomes detectable again after the GFC in developed stock markets with tax year not ending in December. Oppositely, the magnitude of this anomaly has diminished in the emerging financial markets after the GFC, which is consistent with the EMH. The evidence of the leverage effect in the unconditional volatility is proposed that volatility in negative shocks is considerably higher than that of positive shocks across examined stock indices. This phenomenon is more conspicuous in mature stock indices compared to emerging indices. The positive connection between the leverage effect and stock market volatility is propositioned as diminishing magnitude of this effect during the stable market condition after the GFC. Our findings lend reinforcement to the conclusion that some Asia Pacific stock markets satisfy the weak form of the EMH