Sun Spots and Stock Market Anomalies

<div>In this paper we examine whether Russian market is weakly efficient through the presence of&nbsp;</div><div>&nbsp;</div><div>some types of anomalies, which can be employed to realize abnormal returns. We focus on two&nbsp;</div><div>&nbsp;</div><div>main types of anomalies - calendar effects and anomalies which affect investor mood, namely&nbsp;</div><div>&nbsp;</div><div>weather effects. Another anomaly called SAD (seasonal affective disorder) effect was analyzed&nbsp;</div><div>&nbsp;</div><div>a lot by foreign economists, and their results are different: someone argue that in some seasons&nbsp;</div><div>&nbsp;</div><div>with less hours of daylight investors&rsquo; mood is affected and hence asset returns are changing, but&nbsp;</div><div>&nbsp;</div><div>there also researchers who did not find any evidence of this effect. Anomalies were reported in&nbsp;</div><div>&nbsp;</div><div>different stock markets across the world, but there are very few studies of such effects in Russia.&nbsp;</div><div>&nbsp;</div><div>That is why we choose Russian market for studying financial anomalies.&nbsp;</div><div>&nbsp;</div><div>The main goal of this paper is to examine whether external factors (weather, calendar effects&nbsp;</div><div>&nbsp;</div><div>and other anomalies) can affect individuals&rsquo; decisions to invest, and hence stock prices and their&nbsp;</div><div>&nbsp;</div><div>return.</div><div>&nbsp;</div><div>Due to the world crisis in 2008-2009 years, there is very low probability that returns were&nbsp;</div><div>&nbsp;</div><div>affected by anomalies, so we divided research by several sample periods: before, after and in&nbsp;</div><div>&nbsp;</div><div>time of crisis.&nbsp;</div><div>&nbsp;</div><div>Firstly we analyzed the presence of calendar effects using some econometric techniques &ndash;&nbsp;</div><div>&nbsp;</div><div>OLS (with Newey West heteroskedasticity consistent standard errors), GARCH(1,1) and&nbsp;</div><div>&nbsp;</div><div>GJR-GARCH(1,1). According to different studies, the most significant effects are &ldquo;day of the&nbsp;</div><div>&nbsp;</div><div>week effect&rdquo; and &ldquo;month of the year effect&rdquo;. We found that there are some calendar anomalies&nbsp;</div><div>&nbsp;</div><div>on the Russian market, returns are higher in January, May and September, there is a weak&nbsp;</div><div>&nbsp;</div><div>&ldquo;Monday effect&rdquo;. As for weather effects, evidence suggests that there is a relationship between&nbsp;</div><div>&nbsp;</div><div>high humidity and MMVB returns, other weather variables are not significant. We found that&nbsp;</div><div>&nbsp;</div><div>SAD effect is not significant in Russian market, it is consistent with recent findings in foreign&nbsp;</div><div>&nbsp;</div><div>countries. We also noted that many of anomalies do not last a long time, this can be a result of&nbsp;</div><div>&nbsp;</div><div>the crisis in 2008-2009 years,&nbsp;</div><div>&nbsp;</div><div>Econometric approach used in this study revealed calendar and weather anomalies in the stock&nbsp;</div><div>&nbsp;</div><div>returns of Russian market, however, there is still a question of how to explain some of the effects&nbsp;</div><div>&nbsp;</div><div>and how to use this information to get abnormal profits trading on the market.</div>