Enhancing strategic investment decision making from understanding calendar anomalies on Zimbabwe stock exchange: 2011-2020

Abstract

The research was triggered by the fact the ability to predict the behaviour of stock returns is important for strategic investment decision making by investors. However, there is limited known research on the calendar anomalies aspect of market efficiency in Zimbabwe. The research therefore sought to create an understanding of calendar anomalies on Zimbabwe Stock Exchange to enhance strategic investment decision making by investors in Zimbabwe. The research objectives were to determine the presence of the day of the week effect on stock market returns by looking at the volatility of daily stock returns on ZSE; to ascertain if there exist month of the year effect on stock market returns by looking at the volatility of the monthly stock market returns on the ZSE, to determine the effect of volatility of the daily stock returns on daily trading volume at ZSE and to draw some strategic and policy recommendation to enhance the predictability of the ZSE. The research study adopted a descriptive explanatory research design with positivist research philosophy. The researcher acquired secondary data from ZSE for average daily stock returns for all listed companies for a period of 10 years (2011-2020). SPSS v. 23.0 was used for statistical analysis of stock returns data. Normality tests, parametric and non-parametric tests were performed. Descriptive statistics and correlation and regression analysis were done. The research found out that the average daily stock returns at the ZSE are uniform on all week days implying that there is no day of the week effect (DOW) at ZSE. The research also found out that the average monthly stock returns at ZSE are uniform on all months of the year. This means that there is no January effect (JE) at ZSE. The study also found out that there is a month of the year effect in terms of the volatility of the average returns on the stock at the ZSE. Therefore, there exists January in terms of monthly stock volatilities at ZSE. About the effect of trading volume on stock returns, the research established that there is a weak positive impact between the two variables. With this acquired knowledge, investors in Zimbabwe are recommended to ensure that they hold their funds and acquire financial assets in January. Guided by the Johnson and Scholes (1997) suitability- feasibility-acceptability (SFA) test, the researcher suggests the following recommendation to the investors based on the research conclusions: investors are recommended to carry out detailed fundamental and market analysis to identify factors that affect changes stock returns at the ZSE. The existence of monthly stock volatilities at the ZSE in January entails that investors should exercise caution when performing transactions. Securities Exchange Commission is recommended to assist ZSE in its operations to allow improved investor activity by providing the ZSE with infrastructure that allows listing of other securities than just equity, so as to allow more investor activities on the market. The study recommends that there is need to improve the communication infrastructure which can be in form of news portals dedicated to delivering price sensitive news to guide investors. Future researchers are recommended to budget funds to acquire data for extended periods in excess of 10 years and as well to gain proficiency in using STATA and EViews to run GARCH models on similar researches.