טכניון מכון טכנולוגי לישראל
הטכניון מכון טכנולוגי לישראל - בית הספר ללימודי מוסמכים  
M.Sc Thesis
M.Sc StudentRatmansky Ronen
SubjectAnomalies in the Tel-Aviv Stock Exchange
DepartmentDepartment of Industrial Engineering and Management
Supervisor Mr. Yagil Yossi
Full Thesis text - in Hebrew Full thesis text - Hebrew Version


Abstract

  In efficient capital markets financial assets reflect the present value of future returns. If there are factors that affect the prices of securities, and they are exterior to the estimation of securities returns a risks, this may indicate the existence of "anomalies" that may lead to a capital market inefficiency. One of these anomalies is the "January" effect.


    The January effect is an anomaly in the financial market where financial security prices in January are higher than in the other months of the year. This pattern, which applies primarily to small stocks, supports the fact that financial markets are not fully efficient, and suggest the existence of other factors that affect stock prices that are not reflected in models of security (pricing such as the capital asset pricing model CAPM).

   There are various theoretical explanations regarding the "January Effect.”  Each explanation seems reasonable and sensible, although none was proved to be unequivocally the main factor explaining this effect.

   Dealing with the January Effect consists of two main aspects: the practical and the theoretical. The first one's main objective is finding investment strategies that will bring profits above the market return rate. The second one’s objective is the completeness of the commonly used models, in order to price obligations for the best theoretical portfolio possible.

   In this thesis, I gathered monthly return data for the period 2000-2011 for thirteen different indexes in the Tel-Aviv Stock Exchange (TASE).  I used linear regression with dummy variables that indicate the different months. Finally,  I constructed a correlogram  for each index.

       The application of various statistical tests to the thirteen indexes indicates that for nine of the indexes, the January effect is not statistically significant. However, for two indexes (the Yeter and the Bond), the January effect is statistically significant, while for two other indexes (the Real Estate and the TASE25), the significance level is limited in scope.

  The January effect is most apparent in the small cap stocks that are part of the Yeter index. My last finding is consistent with another effect, called "the size  effect",  that claims that, in the long run, the small cap stocks yield better  than large cap ones. The other findings are consistent with recent empirical studies that indicate that the January anomaly has been faded out in recent years.