Turn-of-the-month and intramonth anomalies in the Finnish stock market explained by U.S. macroeconomic news announcments

Abstract

This thesis investigates whether the turn-of-the-month and intramonth anomalies are incorporated in the Finnish market and whether these anomalies can be explained by the release of major U.S. macroeconomic news announcements that are clustered around the turn-of-the-month. Recent evidence from the U.S. stock market gives reason to believe that the turn-of-the-month and intramonth anomalies arise due to the clustered U.S. macroeconomic news announcements. For this purpose we investigate the market returns from the OMXH25- index between January 2001 through December 2007 and the affect of 10 major U.S. macoreconomic news announcements.

The study focuses on 10 U.S. macroeconomic news announcements selected on the basis of previous literature and the Bureau of Labor Statistics classifications of major economic indicators. The 10 macroeconomic news releases are the employment report (EMP), the Institute of Supply Management index (ISMI), the Institute of Supply Management services (ISMS), retail sales (RS), the producer price index (PPI), the consumer price index (CPI), consumer confidence (CC), the import and export price indices (IEPI), gross domestic product (GDP), and the employment cost index (ECI).

To investigate the existence of the turn-of-the-month and intramonth effects on the Finnish market and whether the U.S. macroeconomic news announcements explain the anomalies, a regression analysis approach is constructed using dummy variables. A turn-of-the-month and intramonth anomly are discovered on the Finnish market. However, the main finding of the study is that the turn-of-the-month and intramonth anomalies appearing on the Finnish market are explained by the release of major U.S. macroeconomic news announcements that occur in monthly cycles and are clustered around the turn-of-the-month. Out of the 10 U.S. macroeconomic news announcements the consumer confidence, gross domestic product, ISM index and the import and export price indices show a significant effect on the Finnish market.