A re-examination of the holiday effect in stock returns: the case of Hong Kong

摘要

A strong pre-holiday effect is revealed in this study of Hong Kong stock returns. Importantly, the effect does not appear to be modulated by day-of-the-week effects, which themselves are highly volatile and inconsistent across various sub-periods. As documented in earlier studies for the 1970s and 1980s, a Chinese Lunar New Year (CLNY) effect has been highly significant in explaining Hong Kong's overall pre-holiday return effect. Re-examination of the issue here indicates that the effect has continued throughout the last 15 years. More tellingly, after controlling for Hong Kong holidays, a pre-US holiday return effect is absent from Hong Kong returns for the 1990-2005 sub-period despite its significance between 1975 and 1990. Besides confirming earlier evidence of an inherited US holiday effect in Hong Kong returns during the 1970s and 1980s, it is instructive to note that the waning US pre-holiday effect, as documented in various studies since, can be viewed through the prism of Hong Kong returns. While the US pre-holiday effect appears to have been purged, Hong Kong's own holiday effect, other than that relating to the CLNY, has generally weakened. Finally, despite the persistence of a strong CLNY pre-holiday daily return effect, a 'seasonal' run-up in stock returns in the weeks prior to the CLNY is less apparent than hitherto.