engleski

Is Croatian stock market SAD?

The validity of Efficient Market Hypothesis of Eugene Fama has been questioned and tested on stock markets ever since it has been formed. Behavioural economists have stronger and louder support in the last 15 years regarding stock market anomalies. A main concept of behavioural finance is the assumption that investors are not always rational utility maximizers. Due to psychological, cognitive and other factors which influence human behaviour, investors do not always act rationally on stock markets. This paper explores mood anomalies, specifically the SAD (Seasonal Affective Disorder) effect on the Zagreb Stock Exchange (ZSE). Since behavioural effects are rarely observed on ZSE, this paper is the first one in Croatia which explores such behaviour on the stock market. Seasonal affective disorder is defined as a syndrome of depressive episodes in human behaviour due to changing of the season. Using daily data on stock market return CROBEX for the period January 2010 – May 2018, SAD effects will be tested in order to explore if seasonal changes affect the stock returns in Croatia. SAD effects in this study are measured via photoperiod, since previous research has shown that photoperiod is linked to SAD, characterised by mood, energy, sleep and eating habits of humans, as seasons change over the year. Besides the SAD variable in the model, some control variables will be included as well: January effect and Monday effect as most popular calendar anomalies in stock returns. Methodology used in the study will include univariate GARCH modelling via maximum likelihood method of estimation. Two main contributions of the research will be the following. First one is to summarize main theoretical findings and contributions regarding SAD effect in literature. The second one is reflected in the empirical part of the study where we explore mentioned effects for the first time in Croatia. Based upon the results of the empirical part of the study, conclusions will be made for the Croatian investors and some recommendations for investment strategies on the Croatian stock market.

Seasonal affective disorder, stock market, seasonality, behavioural finance

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