Santa Claus rally and Nigerian stock market return: An illusion or reality?

Abstract

The paper investigates the existence of Santa Claus rally on the Nigerian stock market return using regression technique with the errors modelled by GARCH (1, 1). The authors employ generalized error distributions for the errors of regression model. Some descriptive statistics and residual diagnostic tests such as autocorrelation test; ARCH-LM test among others confirmed that the errors of the return exhibit heteroscedasticity. The significance of the regression coefficients are evaluated by p-values and the highest returns has been observed in January. The empirical findings of this study do not justify the Santa Claus rally instead January effect on the Nigerian stock market returns. Moreover, they observed that the assumptions of intergeneration and tax-selling hypotheses and the effect of window dressing hold for the Nigerian Stock Market.

Keywords: Santa Claus rally, January effect, GARCH (1,1) model, Nigerian Stock Market return.