Holiday Effect Stock Market Based On Behavioral Finance Theory And Empirical Research

Since the1990s, China has experienced the variation of weekend system, golden weeks and multiple traditional holidays. According to the Behavioral Finance, the investors are group of people. And hence, their behaviors are not always rational, which makes the various anomalies appeared in the stock market. The holiday effect is one of the special financial anomalies in the market. It causes the abnormal fluctuations of the market before and after the holidays.In2008, Chinese government made a large adjustment of the holiday setting. The original golden week in May is broken into several small holidays to dilute the concept of golden weeks. Today, it has been four years since last adjustment. Whether the holiday effect is still significant? Combining with the Behavioral Finance theory, this paper will study the deep reason of it and make an empirical research about Chinese stock market.In this paper, we use EMD model to confirm the holiday effect in the stock market of our country. After that, we apply the GARCH model with some detailed dummy variables to make empirical analysis on the dynamic relationship between holiday variation and holiday effect. Finally, through the study on the holidays’calendar characters and the theory of the Behavioral Finance, the paper analyzes the features and deep reasons of the holiday effect in our financial market.The empirical consequence shows that there is a significant holiday effect in Chinese market. The different holidays own some different effects, which was largely influenced by the unique culture, economy and characteristics in China. In general, the pre-holiday effect behaves like a group, but the after-holiday effect dost not.