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This dissertation examines common stock anomalies in the Egyptian stock market from 2005 to 2009. Specifically, it analyzes the day of week effect, month of year effect, quarter of year effect, and size effect. Statistical tests were performed on Egypt's EGX30 index and 23 companies. The results show a significant day of week effect, with abnormal returns found on Sundays. However, no significant month of year effect, quarter of year effect, or size effect were identified. The study recommends trading strategies based on the Sunday effect. It also finds that the Egyptian stock market is not efficient in the long-term.
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- 1. Faculty of Commerce Department of Business Administration An Explanation Of Common Stock Anomalies in The Egyptian Stock Market An Applied Study Dissertation Summary to Fulfill Requirements For The Master Degree of Business Administration Submitted by Mohamed Ahmed Mohamed Awad Supervised By Prof. Dr. Mahros Ahmed Hassan Assistant Professor of Business Administration Faculty of Commerce – Ain Shams University 2011
- 2. 2 Abstract Mohamed Ahmed Mohamed Awad. Explanation Of Common Stock Anomalies in The Egyptian Stock Market/Ain Shams University. Faculty of commerce . Department of business administration 2011. The main objective of this study is to investigate stock market anomalies in Egyption Stock Market during the period from 2005 to 2009, this study has examined the day of week effect,the month of year effect,the quarter of year effect,and the size effect. Therefore, Egyptian stock index EGX30 and 23 companies operating in the Egyptian Stock Market during the same period were implied to test those anomalies. Before going through this study, the market efficiency was tested, Where, the efficiency of stock market was completely identified during the study period as a whole, and more specifically during each year of study, and also determining the efficiency of the economic sectors involved in the Egyptian stock exchange from 2007 to 2009 as a whole and per year. In order to test the study hypothesis stating that there is no market anomaly in Egyptian stock market, both parametric and nonparametric analysis have been applied . the statistical study has been applied within more than one timeframe depending on more than one statistical approach. This study presents a significant day of week effect , and no significant month of year effect, quarter of year effect and size effect, during the time frame of the study and according to the statistical methods used in this study. Keywords: stock Market anomalies; day of week effect; month of year effect; quarte of year effect; size effect.
- 3. 3 Summary and Conclusion The Study Problem The main question of this study is:- What is the status of The Egyptian Stock Market in terms of stock market anomalies? the present study attempts to examine the status of The Egyptian Stock Market in terms of seasonal anomalies impact (day of week effect, month of year effect and quarter of year effect) and Anomalies Based on Characteristics of firms (size effect). And also seeks to uncover The Egyptian Stock Market efficiency level and set strategic trading methods based on discovered anomalies in Egyptian Stock Market. The Study Hypothesis This study based on unique hypothesis stating that:- There is no market anomaly in Egyptian stock market This hypothesis consists of four sub hypotheses as follows:- There is no day of week effect There is no month of year effect There is no quarter of year effect There is no size effect The Study Objectives This study aims to :- 1)verify stock market anomalies in Egyptian stock market , by identifying the significance of the relationship between earn abnormal returns and specific time periods, and the relationship between earn abnormal returns and firm size. 2)imagine Egyptian stock market anomalies.
- 4. 4 3)set strategic trading model based on discovered anomalies in Egyptian stock market where the difficulty of usage any capital asset pricing models. Study Necessity That study is characterized by qualitative modernity, and by focusing on its necessity, we will discover that the study has two sides of necessity; scientific and practical necessity. Scientific Necessity Determine the status of anomalies in Egyptian stock market, and shed light on the level of efficiency of The Egyptian Stock Market. and within the limits of researcher knowledge, to contribute to the development of the first building blocks for the use of Return Predictability studies in determining the level of efficiency of The Egyptian Stock Market, and ability to make extensive studies in the future to explain reasons for appearance of anomalies and compare them to other emerging markets. Practical Necessity Prove the existence of anomalies in The Egyptian Stock Market will be of great importance in practice. Where ,it is possible by tracking the behavior of anomalies to predict the behavior of stock prices at specific times, and according to certain characteristics of firms, and thus find a strategy for trading in The Egyptian Stock Market based on the behavior of anomalies in this market. Data And Methodology This point includes identifying the data sources, the study population, and the study sample, statistical method was used in the test the study hypothesis, each point could be identified as follows:- The Data Source These data were obtained from Egyptian Financial Supervisory Authority (EFSA), Egyptian stock market (EGX) and Egypt for Information Dissemination (EGID).
- 5. 5 the study population The population of this study represents in the most active and liquid stocks of companies during the five years covered by this study that is from January 2005 until December 2009. Thus, the study population is firms that included in Egypt stock index EGX30 over the same period. The Study Sample The study sample consisted of 23 shares represent most of the sectors working in The Egyptian Stock Market during the study period Statistical Method In order to Test the study hypothesis both parametric and nonparametric statistical methods were used together. The regression analysis test was used in testing seasonal anomalies as a parametric method and Kruskal Wallis analysis was used as a nonparametric method. And was used One Way ANOVA Test as a parametric method was used in order to test the size effect and use the Mann Whitney test was used as a nonparametric method. Testing the efficiency of The Egyptian Stock Market during the study period using the Run Test during the study period as a whole, and during each year of the study separately. Results The results prove the existence of day of the week effect that is the Sunday effect during the study period as a whole. The results also support that there is no effect of month of year effect, as well as quarter of year effect, as well as size effect. And also found results confirmed that The Egyptian Stock Market is not efficient in the long term period.
- 6. 6 Recommendations Investors are advised to take the trading strategies based on the existence of the Sunday effect. It is recommended to make comparison between four consecutive quarters from the same year, and not between typical quarters from different years Investors are advised to invest in large firms stocks, because that would reduce the risk.