Behavioural Finance Perspectives: Market Anomalies and Investor Decision Making

Panait Cornel ()
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Panait Cornel: Romanian Academy, School of Advanced Studies of the Romanian Academy, Doctoral School of Economic Sciences, National Institute for Economic Research “Costin C. Kirițescu”

Proceedings of the International Conference on Business Excellence, 2025, vol. 19, issue 1, 2967-2977

Abstract: The persistence and evolution of two well-known market anomalies − the Monday and January effects − in the S&P 500 over 2000-2024 is investigated in this paper. Conventional wisdom, including the Efficient Market Hypothesis (EMH), holds anomalies are “arbitraged out” from the market once discovered. Still discernible, though, are the two mentioned. The study examines daily closing prices and monthly returns of the S&P 500 to determine the degree to which these anomalies are still present and their evolution over the years. According to the analysis, Monday closing values are smaller than those of the other weekdays; however, this difference seems to have been lessened over time, suggesting some effort at arbitrage. Though the January effect also weakens post-2010, the data confirms it similarly. Several behavioural finance frameworks help explain the ongoing existence of these anomalies in the market, independent of the present high-frequency trading paradigm. One of the theories that clarifies how even after the market adjusts, such anomalies can survive because of investor behavior and information distribution is the Adaptive Markets Hypothesis. Therefore, this paper explains how these arbitrage opportunities can last beyond their initial discovery by connecting the practical consequences of financial market anomalies and interactions to behavioral finance theories. The observations could be helpful for academics, legislators, and investors since they show how behavior-driven market patterns can survive and change past general investor rationality.

Keywords: capital markets; behavioural finance; market anomalies; Monday effect; January effect (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:poicbe:v:19:y:2025:i:1:p:2967-2977:n:1033

DOI: 10.2478/picbe-2025-0227

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