Detection of Calendar Effects, Measurement of Investor Sentiment and Analysis of Their Effects on the Volatility of BRVM Returns

Abstract

Our study focused on daily data from the Regional Stock Exchange (BRVM) covering the period from 4 January 2014 to 26 February 2025. We selected five indices, including the two main indices and the three sector indices with the highest number of listed companies. Our goal was to detect the existence of calendar anomalies and analyse their combined effects with investor sentiment on stock market returns. To do this, we used two different approaches (linear modelling and the application of a binomial Logit model) on dummy variables for days of the week and the investor sentiment indicator. Using the linear regression approach, we tested the effect of investor sentiment and the days of the week on BRVM returns. The binomial Logit regression approach was then used to determine the effect of investor sentiment on market direction. Our various results showed that investor sentiment played an important role in the evolution of BRVM stock market returns. The results also indicate that there is no consensus on the effect of calendar anomalies, mainly those of the days of the week, on BRVM returns. Indeed, weekday anomalies vary according to the different indices. We also found that there was a positive and significant effect of the month (January effect) on the stock market. We justified this result through the literature as the result of strategies developed by investors and various market players to either avoid high taxation or as an opportunity to take advantage of year-end bonuses to acquire more assets in order to expand and diversify their stock portfolios.