Stock Markets Anomalies- a Critical Review of the Literature

Abstract

The security market is a very important component of any country's economy, in other words, it attracts investors and ultimately contributing to the economic growth of such countries. For example, what an investor may look for before investing is market efficiency. EMH provides that information is fully available and reflected in the prices of security and if this information is available to all investors then abnormal profits are not possible (Fama, 1970). According to Khan, Khan and Khan (2014), if there are opportunities to make abnormal profits, then the market is said to be inefficient, because EMH was established on the idea that no individual has the ability to earn anomalous profit. The inefficiency is referred to as an anomaly. Stock market anomalies are reported by researchers for developed as well as emerging markets. Calendar effect is the most talked anomaly, fundamental anomalies and calendar time anomalies may also be observed in the stock market. For the study, the Kenya and US markets are taken as the representative of emerging and developed markets, respectively.