Seasonality and January Effect Anomalies in the Jordanian Capital Market

Abstract

This paper primarily aims to investigate the seasonality of monthly stock returns and January effect anomaly in an emerging stock market of a developing country namely Jordan. Evidence on return seasonality and January effect would have important implications for investment strategies to gain abnormal returns and it would invalidate the paradigm of the efficient markets hypothesis. For the period 1994-2002, daily returns on the Amman Stock Exchange (ASE) are employed. Using the standard GARCH, exponential GARCH (EGARCH) and the GJR models, we found no evidence of monthly seasonality as well as January effect in the ASE returns. These results indicate that investors cannot take any advantage of information about the month of the year when investing in the ASE to gain abnormal returns. On other words, these new findings indicate that investors in the ASE should not consider the seasonal effects when constructing their portfolio.

Keywords: Seasonality and January Effect, the Jordanian Capital Market

JEL Classification: G14