The impact of trading-restricted, business days and trading, non-business days on Australian small-cap, large-cap and market returns

Abstract

This paper comprises an empirical analysis of trading-restricted, business days and trading, non-business days on the Australian Securities Exchange (ASX). Trading-restricted, business days refer to days where trading hours are shorter but business activity (including settlement) is normal; trading, non-business days refer to days where trading takes place almost normally but the settlement of securities is delayed. Seven days are included in the analysis: the Bank Holiday in NSW (non-business), Labour Day in NSW (non-business), Easter Thursday (early close), Labour Day in Victoria (non-business), Melbourne Cup Day in Melbourne (non-business), the last business day before Christmas (early close) and the last business day of the calendar year (early close). Three indexes provide different daily return measures: the All Ordinaries (market), 1958-2007, the Small Ordinaries (small-cap), 1994-2007; and the ASX100 (large-cap), 1992-2007. The trading-restricted, business day and trading, non-business day effect is examined using non-parametric and regression methods. The findings indicate return abnormalities on three days when trading and/or business activity is restricted: Melbourne Cup Day, the last business day before Christmas and the last business day of the year.