GB30403-2020-BG17110153-BG17160710-BG17110024

HOLIDAY EFFECT ON ARGENTINA’S STOCK MARKET

(MERVAL)

VITHYAMANI SELVAMANI- BG17110153,

NIMLAN RAMAKRISNA- BG17160710,
HAREETHRA SUGUMARAN- BG17110024.
bg17110153@student.ums.edu.my (011-1536 9572)

Abstract
This paper shows the pre- and post-effect of the holiday effect in the MERVAL (Argentina)
stock market from 8th of October 1996 to 18th of February 2020. Followed by whether the
holidays affect the MERVAL stock market. To obtain detailed data of the MERVAL stock
market in Argentina, we extracted and brought together dummy variable so that we can
obtain the results of the pre- holiday and post-holiday effect of MERVAL. Based on the data
derived, the results show that the pre-holiday and post-holiday effect does not affect the
MERVAL stock market.
Keywords: Holiday Effects ; MERVAL ; Argentina
1. Introduction
Holiday effects mean the inclination for a stock market to acquire on the last trading day
prior to an exchange mandated long weekend/holiday. (Farlex Financial Dictionary, 2009).
The study shows the holiday effects in the MERVAL stock market since October 1996 till
February 2020. The MERVAL Index is the most significant index of Buenos Aires Stock
Exchange. Its name is an acronym for MERcado de VALores) which can literally be translated to
stock market. Calculated as the market value of a portfolio of stocks selected based on their
market share, number of transactions and quotation price, it is a price-weighted index. The base
is 0.01 Argentine pesos as set at 30 June 1986. The main objective is to see whether the
holidays affect the MERVAL stock market, regardless pre-holiday or post-holiday. If yes,
through this paper we will be able to find out how it affects the MERVAL stock market as
well. It is significant to figure this out as it will provide us with a assumption that may work
on other countries whether their holidays affect them as well.
2. Literature Review
As demonstrated by the efficient market hypothesis (EMH), stock prices follow an
unpredictable walk and past data information can't be used to anticipate what's to come. As
needs are, there ought to be no strange returns for exceptional occasions for instance, such
as holidays, as these holidays are: 1) predetermined; and 2) contain no relevant information
for stock prices. However, documentation at chances with the EMH is expanding
tremendously and different studies have documented predictableness of return (Picou,
2006; Mehran, Meisaimi and Busenbark, 2012), including predictability around public
holidays.
Picou (2006) started their research process with the test for the presence of a global stock
market peculiarity or in another word anomaly. By utilizing day by day data information
covering the period from October 1989 till June 1999, this analyzation finds evidence on
stock market index opening and closing prices by using variable regressions method. The
result suggested that the holiday reaction happens during the first trading day after a
holiday. The trading after a holiday closing is definitely positive and fundamentally not the
same as all other trading days. A specific level of shared trait subsist in the holiday relations
for all exchanges. On a related note, Wung Kim (1994) also studied how the holiday effect
affects the stock returns. Daily data of the United States and Japan stock market index from
the year 1963 till 1986 is analysed using the sample mean, standard deviation, median, and
size of the sampling method. The outcome portrayed abnormally significant yields on the
trading before holidays in all three of the major stock markets in the United States. The
holiday effect also occurred in the UK and Japanese stock markets. The determination of
holiday effect over countries proposed that the holiday’s effect is unique to the stock market
of a country.
Various studies have also examined the pre-holiday effect. For instance, Ariel (1990)
recorded zero abnormality in the pattern of daily stock index returns bordering holidays.
Through daily data covering the period of 1963 till 1982, the study finds evidence on the
stock market index of Canada by using means, standard deviation, and frequency method.
The results suggested that the high mean return accumulation to the CRSP equally and
value-weighted indexes on the trading day before the holidays is statistically positive as on
average the pre-holiday yield equals nine to fourteen times the yield on normal trading days.
These statistics suggest the possibility that there may be some buyers who preferentially
buy on pre-holidays. Other than that, J.Fabozzi (1994) finds that the returns on the futures
contract are relatively higher during preholiday periods compared to non-holiday returns. By
observing daily data from the time frame of 1969 to 1989 of United States stock index
returns from using sample screening procedures and capital asset pricing model method.
The findings proposed the proof of a higher trading volume encompassing trade-open
holidays, trailed by some instances of more significant yields for holidays. There is a critical
higher amount of return for the day prior to a holiday.
On the other hand, several studies suggested the pre-holiday effect has declined. Chong,
Kudson, Keasey, and Littler (2005) studied pre-holiday effects. Daily data of a timeframe
from 1963 till 1997 of the US, UK, and Hong Kong stock market index is analyzed with mean
and variance method. The result propounded that the effect was present and solidly
significant in the primary sub-timeframe (1973-1979), and not critical in the second and
third sub-time frames (1979-1985 and 1985-1991), and the impact got negative and
robustly non-significant for the fourth sub-timeframe (1991-1997). The pre-holiday effect in
U.S. markets has declined and continued to briefly reverse.
3. Research Methodology
Into and out of this research, we tried to analyse the holiday effect on MERVAL stocks. The
type of research that will be carried out in this examination is quantitative research. The
occurrence is examined by the regression equation stated below:
Return=PreH + PostH + e
Pre-H: one day prior holiday
Post-H: one day after holiday
There is a total of 282 official holidays in Argentina. We have used secondary data sources
obtained through Yahoo Finance. Our data collected covers the period from 8th Oct 1996 till
the 18th Feb 2020.The data is analysed through regression analysis.
4. Results
Pre-Holiday Post-Holiday
Mean 0.111606142 Mean 0.148786342
Standard Error 0.100153416 Standard Error 0.151148663
Median 0 Median 0
Mode 0 Mode 0
Standard Deviation 1.681861855 Standard Deviation 2.538217682
Sample Variance 2.828659298 Sample Variance 6.442549
Kurtosis 2.728189027 Kurtosis 3.257288542
Skewness 0.46371307 Skewness 0.016733713
Range 13.17929377 Range 20.64591753
Minimum -6.237000507 Minimum -11.03193035
Maximum 6.942293262 Maximum 9.613987183
Sum 31.47293205 Sum 41.95774846
Count 282 Count 282
Confidence Level(95.0%) 0.1971462 Confidence Level(95.0%) 0.297527391

Table 1 : The descriptive statistics for pre- and post-holiday for Merval
Table above shows the impact of the descriptive statistics for pre- and post-holiday. There is
a total of 282 official holidays in Argentina beginning from 8 th Oct 1996 till the 18th Feb
2020. We can clearly observe that the highest daily return is post-holiday compare to pre-
holiday return. Moreover, we can see the standard deviation of post-holiday is higher than
pre-holiday. Hence, post-holiday is spread out a large range of values and the data points
are father from the mean.

Average Return (%)

pre holiday post holiday
15

10

0
1 13 25 37 49 61 73 85 97 109121133145157169181193205217229241253265277
-5

-10

-15
 Figure 1 : The Average return(%) for Merval
Figure 1 shows a line graph of the average return of pre- and post-holiday for Merval. We
also clearly see that the most highest and lowest average return in percentage(%) is post-
holiday.

Coeffic Standar Lower Upper Lower Upper

t-Stat P value
ients d Error 95% 95% 95.0% 95.0%

0.0612 0.02966 2.06524 0.03894 0.00311 0.11941 0.00311 0.11941

Intercept
63478 3966 9043 1641 1621 5335 1621 5335
- -
0.0761 0.15014 0.50731 0.61194 0.37051 0.37051
Pre-H 0.21817 0.21817
72907 7989 8859 9469 6029 6029
0215 0215
- -
0.1135 0.15014 0.75644 0.44940 0.40792 0.40792
Post-H 0.18076 0.18076
79335 7989 9255 9133 2456 2456
3787 3787

Table 2 : Ordinary Least Square (OLS)

Table 2 presents the data that has been used for this investigation is the data of a MERVAL
(Argentina) stock market from 8 th Octobor 1996 till the 18 th February 2020. This results
begins with Ordinary Least Square(OLS) regression method. Table 2 contains the effects
that happens on the pre-holidays and post-holidays. From this table 2, we can clearly see
that pre- and post-holidays are statistically not significant with a positive return as well as
the post-holiday is higher return than pre-holiday. Hence, the holidays does not affect the
stock market of MERVAL.

5. Conclusion
The main objective was to see whether the holidays affect the MERVAL stock market,
regardless pre-holiday or post-holiday. To analyse this cause we had collected Descriptive
Statistics, evaluated the average return and also used the Ordinary Least Square (OLS)
model to determine the existence of volatility before and after the MERVAL index. The data
collected was from 8th of October 1996 to 18th of February 2020. From the findings obtained
through this study, it is proven that holidays do not affect the MERVAL stock market. This is
because it happened to be that the pre- and post-holidays were not significant with a
positive return and the return of post-holiday is greater than the pre-holiday.

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