Calendar Anomalies in Islamic Frontier Markets

This study investigates calendar anomalies in eight Islamic frontier markets. Our sample consists of the daily closing prices of their stock indices for the period of January 2006 to September 2019. The data are categorized with respect to day-of-the-week and month-of-the-year according to both the Gregorian and Islamic calendars. We control for time-varying systematic risk using Morgan Stanley Capital International (MSCI) index as the proxy for the market portfolio and apply Bonferroni correction to reduce the occurrence of false-positive results. We find little support for the proposition that any of the Islamic calendar months generate abnormal returns, bar a slight negative abnormal return during the holy month of Rajab for Kuwait. We find evidence of a small negative Monday effect for the stock markets of Bangladesh and Pakistan and a small positive January effect for the stock market of Morocco. The results support weak-form market efficiency, suggesting that investors in frontier stock markets should not expect to outperform the market on a consistent basis when trading on particular days of the week or months of the year according to the Islamic or Gregorian calendar.