New Evidence on the Holiday Effect in the Chinese Stock Market

Abstract

This paper investigates the holiday effect in the Chinese stock market using the GARCH (1,1) and GARCH (1,1)-M models for the period of January 2006 to February 2017. The findings reveal that most of the broad market indices exhibit the holiday effect. At the industry level, the holiday effect is consistently observed in the Shanghai Stock Exchange, while the results are mixed in the Shenzhen Stock Exchange. The change in the risk premium provides a mixed result in explaining the holiday anomalies, and the holiday effect is dominated by the non-culturally-based holidays, which fall on the turn of the month.