Holiday Effects on S&P 500 Index Volatility and Return Rates for Market Efficiency Validation

Zihan Li

2024

Abstract

The holiday effect in the financial landscape is important, especially in understanding how market behaviour changes around holidays. This phenomenon has been under-appreciated in the past. This article provides additional evidence for the holiday effect. It analyses whether the volatility and returns in the S&P 500 Index are significantly different between the five trading days before the holiday, and the rest period. Next, the effectiveness of the market is determined through the 'efficient market hypothesis'. The adjusted closing price for the S&P 500 index was calculated for each trading day between December 23, 2013 and December 29, 2023. This work will build a Generalized Autoregressive Conditions Heteroskedasticity model (GARCH) to calculate the volatility of the index through the index returns. Both datasets are tested using the F Test method and T Test method. The results show low volatility and high returns for the five-trading day of the pre-holiday time period. As a result, it indicates that the holiday effect is predominant in S&P 500 Index, which represents by the 500 U.S. companies that are under the control of the S&P 500. Due to arbitrage opportunities, the U.S. Stock Market has low efficiency.

Paper Citation

in Harvard Style

Li Z. (2024). Holiday Effects on S&P 500 Index Volatility and Return Rates for Market Efficiency Validation. In Proceedings of the 1st International Conference on E-commerce and Artificial Intelligence - Volume 1: ECAI; ISBN 978-989-758-726-9, SciTePress, pages 547-552. DOI: 10.5220/0013270300004568

in Bibtex Style

@conference{ecai24,
author={Zihan Li},
title={Holiday Effects on S&P 500 Index Volatility and Return Rates for Market Efficiency Validation},
booktitle={Proceedings of the 1st International Conference on E-commerce and Artificial Intelligence - Volume 1: ECAI},
year={2024},
pages={547-552},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0013270300004568},
isbn={978-989-758-726-9},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 1st International Conference on E-commerce and Artificial Intelligence - Volume 1: ECAI
TI - Holiday Effects on S&P 500 Index Volatility and Return Rates for Market Efficiency Validation
SN - 978-989-758-726-9
AU - Li Z.
PY - 2024
SP - 547
EP - 552
DO - 10.5220/0013270300004568
PB - SciTePress