Define Calendar Anomaly

Calendar Anomaly: Calendar anomalies can be defined as any irregularity or consistent pattern occurring at a regular interval or at a specific time in calendar year. Presence of these anomalies in a calendar year is the biggest threat to the concept of market efficiency as any one by observing these patterns can beat the market. Theoretically, anomalies are the result of shortfalls in the models applied for testing market efficiency rather than of inefficiency of market (Bowman, Buchanan, 1995). Calendar anomalies in the financial markets are well-documented phenomenon. Different studies have found that asset returns are dissimilar on days of the week, months of the year; turn of the month and before holidays. These empirical regularities are more pronounced in securities markets and thus have been subject to investigation in many studies. The Empirical examination of calendar anomalies in foreign exchange markets, on other hand, has been limited. However, the extant studies point out to the existence of a day-of-the-week effect in the spot rates of major currencies and also traded futures and options on such rates.

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