January Effect and Value Premium in Thailand
Post by MSF Chula at Monday, 18 September 2017 02:36 PM

This paper investigates the seasonality effect on the value premium, which is defined as the positive difference of the return between value stocks and growth stocks, in the stock exchange of Thailand. The research is based on the discovery of value premium as measured by book to market value. Value premium anomaly is shown to exhibit a pattern of seasonality in major markets across the world. The paper provides an exploration across firm size and calendar seasonality for the stocks in SET index from the year 2000-2015. The result reveals that Thailand SET index also exhibits a strong seasonality pattern for value premium anomaly. Contradictory to the results in the US market by Loughran (1997), for the largest size quartile of stocks by market capitalization, the value premium is not driven by January effect during the period of 2000-2015. Nevertheless, when separating the subject period to pre and post 2008 credit crisis, the paper finds that value premium for big market capitalization stocks still possess January effect for the pre-crisis period. The same cannot be said about the post-crisis period, however.

In addition to January effect, SET index has been observed to exhibit a strong seasonality pattern for the month of December as well (Bo and Friday, 2015), but this paper finds that value premium does not possess a December effect seasonality unlike the index in this case. This may be explained by the window dressing effect that causes the investors to prefer the winning and growth stocks at the ending month of the year which result in a closing gap between the return of value and growth stocks during the month of December.

Last updated at Monday, 18 September 2017 02:36 PM