The return on Icelandic shares in the run-up to and the aftermath of the financial crisis

Abstract

The return on stocks that are listed on the Icelandic Stock Exchange has a few unusual characteristics in the trading days around the turn?of?the?month, quarter or year. The price of stocks rises on average significantly in the last trading day of the month and then declines again in the first trading day of the month. This trend is more pronounced at quarter?ends and year?end than other months. It is well known from previous research on other stock markets that the return on stocks is unusual around the turn?of?the?month but a pattern like the Icelandic one does not seem common. One possible explanation is that some market participants try to raise the price of stocks right before the end of a period. The pattern of price changes during the day is however such that this explanation seems rather unlikely. Another possible explanation is that some market participants have a tendency to increase their holding of stocks on the last trading day of a period.