Stock Market Anomalies - A Literature Review

Abstract

This paper is aimed to provide the understanding of anomalies presented in stock market by summarizing some of the existing contributions. Basically, these are highlighted by several researchers as deviations from the conventional or we can say the traditional theories. This paper not only introduces those anomalies but also highlights the causes of anomalous behavior observed in indicators of stock market performance as documented by researchers. Studies of other researchers as well are utilized. Along with this, primary data is gathered through interviews with officials at Pakistan Stock Exchange (formally known as TRE Certificate holders). The overall content from secondary sources concludes that stock markets have been facing various anomalies including abnormal price changes known as price volatility, stock price predictability, equity premium puzzle, volatility in trade volume etc. comprising that anomalous behavior. The content also reveals the causes of those anomalies that include calendar effects, political effect and macroeconomic factors ‘effect and last but not least the behavioral biases effect. It is expected that this study will contribute towards the understanding of documented anomalies and will also help the concerned bodies to identify the causes behind the inefficiencies so that the performance of the market could be understood properly.