The pre-holiday effect and positive emotion in the Taiwan Stock Market, 1971–2011

Abstract

This study presents a behavioural explanation of the pre-holiday effect. For the period 1971 to 2011, we first find that the mean pre-holiday return in Taiwan's major stock market index is statistically significantly higher than the mean non-pre-holiday return. Second, the pre-holiday event offers a return that differs from that on non-pre-holidays in an economically significant manner. Third, the high return on pre-holidays is not attributable to risk, other calendar anomalies, nor macroeconomic factors. Finally, the pre-holiday effect is related to proxies for positive emotion among investors. We conclude that these findings are consistent with the positive emotion and the pre-holiday effect hypothesis.