2.0 Literature review
This section provides literature review on holiday effect on Thailand, Philippine and
Indonesia stock market volatility. Many previous studies were conducted in different locations with
various instruments to examine the holiday effect on stock market which result in highly abnormal
returns and highly abnormal risk. (Surachai Chanchara, 2020) The holiday effect is the abnormal
behaviors in stock market returns is different from normal returns. The holiday effect is known as
calendar anomalies in financial stock market. (Razvan Stefanescu, 2021)
Surachai Chancara (2020) use GARCH model which included GARCH-M, Threshold
GARCH-M, Exponential GARCH-M to analyze the holiday effect on market reaction in the Stock
Exchange of Thailand (SET) which trades in economically-neutral events on Thailand stock market.
The study conducted an efficient market hypothesis whereby the investor behaviour affected by the
holiday. The positive mood of investor yield to positive influence on stock market. Investor
behaviour can affect the stock market returns and liquidity during long weekends and holidays
especially during the period of Coronavirus pandemic show obvious extended holiday effect on
stock market. This statement proves by the study of Razvan Stefanesu and Ramona Dumitriu,
investor could have optimistic mood during public holidays associated to public holidays, religious
events. (Razvan Stefanescu, 2021) The investor behaviour during holiday led to change in trading
patterns and in turn leads to change in returns. (Surachai Chanchara, 2020)
In a meantime, previous studies show that pre-holiday and post-holiday have high
significant on positive returns in the Thailand stock market. The abnormal returns in pre-holiday
are higher than post-holiday supported by the several studies such as Alex Gakhovich (2011) and
Audrey Kudryavtsev (2019) in research of holiday effect in the central and eastern European
financial markets, Thailand small companies have significant abnormal returns before Chinese New
Year. (Kudryavtsev, 2019) (Alex Gakhovich, 2011). The stock market return is different from the
normal rate return on pre-holiday and post-holiday. The normal rate returns are higher than normal
return on pre-holiday due to the increased transactions and lower return on post-holiday due to the
decrease transactions. (Ken Holden, 2005)
A number of studies examine the calendar seasonality in returns of financial market
represent the day of the week effect is a regular phenomenon for developing economies stock
market. Cesar C. Rufino and Neriza M. Delfino states that the financial market returns in Philippine
stock exchange market is highly efficient in its function of price formation due to the day of the
week effect, particularly referred to Monday effect and weekend effect. The Philippine stock
exchange market becomes high market efficiency since adopted the online disclosure system and
the advanced warning and control system resulting in best performing stock market in the world
regarding to CNN money. The study proves the present of the day of the week effect in PSE by
Kruskall-Wallis Test which create opportunities for investor and speculators to conduct arbitrage.
(Cesar C. Rufino, 2016) Apart from the day of the effect, the Philippine stock market index was
affected by Peso-Dollar exchange rate and crude oil prices according to Abraham C. CAMBA Jr
(2020). (Jr., 2020) The study of Ray Anthony (2019), the Philippine stock market entered high
volatility due to political and economic events such as currency depreciation and financial crisis
and by employing a Markov-switching model to analyze the monthly return of the stock market.
(Almonares, 2019)
According to Nugroho Sasikirono and Harlina Meidiaswati, the average return in
Indonesia’s stock market is lower at pre-holiday and 4 times higher in the post-holiday compare to
other trading days. The holiday effect such as Christmas, Easter and Eid al-Adha show positive
influence on Indonesia’s stock market. Nevertheless, Eid al-Fitr and Chinese New Year show nor
negative or no effect to the stock market return. (Nugroho Sasikirono, 2017) The stock price during
holiday can be manipulated by news and media released. Riznaldi Akbar (2016) examines
investor’s behavior during price manipulation by text mining analysis states that most investor are
short-sighted on profit and loss statement without look through the corporate fundamental valuation.
As a consequence, the stock price manipulation based on news and social media
platform creates negative bias towards decline stock price. (Akbar, 2016) Some similar studies
regarding holiday effect on Indonesia stock exchange market which is Said Kelana Asnawi,
Giovanni Salim, Wahid Abdul Malik (2020) states that more information opportunities during
transaction holidays, the market anomalies can result in abnormal return where there are more
opportunities for stock prices changes tan normal trading days. Unfortunately, the concept of
holiday effect and the result regarding previous studies does not match probably due to different
efficient market hypothesis. The tendency of the average stock return on pre-holiday is higher than
the post-holiday return than normal daily rate of return. (Said Kelana Asnawi, 2020)
Overall, this research contributes to the market anomaly due to the holiday effect on
stock exchange market. The study of Kotchakorn Charoenying (2020) prove that stock market
anomalies is correlated with the pre-holiday and post-holiday anomaly. (Kotchakorn Charoenying,
2020) It shows significant result on holiday have large influence on the anomaly in stock exchange
market.
5.0 Conclusion
To conclude, the holiday effect occurred in Thailand, Philippines and Indonesia stock market. The
result shows the tendency of stock market return is affected by the investor behavior; thus, the
behavior was influence by the news and media released during pre-holiday and post-holiday. For
instance, the investor behavior during Covid-19 pandemic is eager to make an investment by
increasing their trading activities in line with press articles, media reports and expert opinions.
(Regina Ortmann, 2020) Apart from that, the public holidays such as the Chinese New Year only
give effect on Thailand and Philippine stock market but not the Indonesia stock market. The holiday
effect on these three-country shown vulnerability on stock market returns and liquidity based on
events purpose.
References
Akbar, R., 2016. Understanding Investor’s Behavior During Stock Price Manipulation: A Case of
Indonesia's Stock market. Jurnal Manajemen/ Volume XX, No.01, pp. 142-150.
Alex Gakhovich, O. D., 2011. The holiday effect in the Central and Eastern European Financial
Markets. Investment Management and Financial Innovations, Volume 8, Issue 4, p. 7.
Almonares, R. A. L., 2019. Markov Switching Model of Philippine Stock Market Volatility. DLSU
Business & Economics Review 29(1) , pp. 24-30.
Cesar C. Rufino, N. M. D., 2016. Day-of-the-Week efefcts in the Philippine stock Exchange: Do They
Exist Amid Mordenization?. DLSU Business & Economics Review 25.2 , pp. 41-52.
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