Abstract

This paper uses asset pricing models to analyse whether the nascent Malawi stock exchange exhibits calendar anomalies and whether returns are influenced by factors investigated in mature and more sophisticated markets. The findings are that there exists a positive Tuesday and Thursday day of the week effect on returns at the market level but with the lowest risks. However, when we control for the size effect and the value premium as per the Fama and French (1993) three-factor model, we find that the day of the week effect disappears. Rather than the usual January effect, May has a stronger effect in terms of month of the year effect. The possible profit opportunities on the SEM in terms of both economic and statistical significance are also investigated and how robust these strategies are after controlling for size and value. Strong momentum profits were found to be associated with small market capitalization portfolios as well as high book equity to market equity. The momentum factor was also statistically significant when considering momentum portfolios, in addition to the size effect and value premium. However, the explanatory power of the momentum factor does not dominate that of size and value.

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School	: School of Law, Economics and Government
Issued Date	: 2019

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