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    The effects of religious holidays on stock returns: evidence from Istanbul stock exchange
    (İstanbul Bilgi Üniversitesi, 2021) Can, Ahmet Melih; Reis, Ebru
    ABSTRACT: Holiday effect is observing abnormal returns than usual in official holidays. This effect has been proven by researches in many developed and developing countries, especially in USA. The most of the studies indicate that higher positive returns before and/or after holidays. However, in a few studies, there are more returns that are negative or no significantly different return before holiday, as well as a negative return after holiday. Furthermore, in some studies, more positive return before and/or after holidays is observed just in some countries while not observed in some others. These different findings obtained in the previous researches stem from that almost every study use different methodological approaches and analysis techniques. In some studies, the effect is examined only before or after the holiday, while both before and after the holiday in some studies. In many studies examine that different series of datasets for different holiday types and countries while few studies are based on a single series of dataset. In these studies, there is also no consensus on how many days should be use to examine the impact before and/or after the holiday and whether the impact should be examined cumulatively for a group of days or together for pre- and post-holiday or separately for each day. Regarding the effects of religious holidays on returns in stock exchanges, this approach differences continues, and in these studies, the analyzes are mostly based on religious days, not on religious holidays, but they are mostly focused on Ramadan month (not on the feasts of Ramadan and Sacrifice which are quite long-lasting holidays and have different structure as they are holiday) in almost all of these studies. Therefore, there is no study that accepts Ramadan and Sacrifice holidays as a single dataset and analyze 4 days before and after these religious holidays as cumulative (not on a daily basis) as well as no study investigating pre- and post-effects in each model together. These reasons have necessitated to conduct such a study.In this research, the effect of religious holidays in Turkey on returns in stock exchanges are investigated with daily returns of BIST100 index of Istanbul Stock Exchange (ISE) for 21 years from 01.01.1999 to 31.12.2019 including 4 days before and 4 days after holidays. Primarily, non-parametric chi-square test used in detecting the existence of holiday effect. In chi-square test, percentage of positive and negative returns to number of all returns used on the transaction days before and after the religious holidays. In estimating specified models, primarily the classical linear regression models which are estimated by Ordinary Least Squares (OLS) and Newey-West’s correction are used in calculating standard errors are benefited from. As in case of varying variance, classical linear regression models with (OLS) might be fail in estimating. As in our data, the returns are leptokurtic (having wider tail) and the variance cluster (volatility) is observed, The Autoregressive Conditional Heteroscedasticity (ARCH) family models that are suggested in case of volatility and wider tails in financial return series in order to be able to estimate the models better. In the analysis, Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models used to capture symmetrical effect and The Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) models used to capture asymmetrical effects. According to the findings obtained in the research, in none of the GARCH and EGARCH models or multivariate regression analysis, it is found that average daily returns before the religious holiday in Turkey differ significantly compared to the ones on normal days. Therefore, in all methods, both daily average returns before and after the religious holiday in Turkey are not significantly different together.