The Other Month Effect: Some Evidence from the Central and Eastern European Markets

Wen, Yi-Chieh and Li, Bin (2016) The Other Month Effect: Some Evidence from the Central and Eastern European Markets. Acta Oeconomica, 66 (1). pp. 107-124. ISSN 0001-6373

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Abstract

January returns on stock markets can be used as a barometer for the subsequent 11-month holding period returns as documented by Cooper et al. (2006). We examine this apparent anomaly and analyze the effects of other holding periods of 1, 3, and 6 months in six Central and Eastern European transition economies from January 1991 through December 2013. Our results do not support the presence of the other January effect (OJE) in five of the six markets. Instead, the results reveal significant anomalies in non-January months and that such effects vary across markets. This latter evidence might reflect different characteristics in these economies, including diverse levels of market efficiency, local risk factors, and portfolio management among others. Furthermore, we construct a trading rule using the other month effect to illustrate the possibility of developing profitable investment strategies to earn abnormal returns.

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