Month-of-the-Year Calendar Anomalies in Portfolio Excess Returns in the Nigerian Stock Market

Abstract

The study investigates month-of-the-year calendar anomalies in portfolio excess returns in the Nigerian Stock Market. It uses a sample size of 139 companies listed on the Nigeria Stock Exchange (NSE) for the period of 2007 to 2014. Data on share prices, all share index, price-to-book value, firm capitalization, market capitalization, and Treasury bill rate were obtained from NSE and CBN's official website. The study employed the market model as well as Fama and French and Carhart portfolio construction procedures. Ten portfolios based on market capitalization, price to book value and gainers to losers’ criteria were constructed. The time series pooled multiple regression analysis was employed in the study and expressed in the form that excess portfolio returns regress on monthly calendar dummies. The study found that there was no significant January effect on portfolio excess returns. However, there was strong evidence of July and August anomalies on most portfolios formed. The July and August monthly calendar anomalies were negative and significant at a 5% significant level of SH, BH, BPW and BPL portfolios. It is recommended that investors and equity portfolio managers should consider buying for their portfolio construction around July and August due to the existence of statistically significant negative returns around those periods. Also, regulators should ensure the prompt release of mid-year reports by listed firms to correct the market anomaly.