Calendar effects, market conditions and the Adaptive Market Hypothesis: Evidence from long-run U.S. data

In this paper, we examine the Adaptive Market Hypothesis (AMH) through four well-known calendar anomalies in the Dow Jones Industrial Average from 1900 to 2013. We use subsample analysis as well as rolling window analysis to overcome difficulties with each method type of analysis. We also create implied investment strategies based on each calendar anomaly as well as determining which market conditions are more favourable to the calendar anomaly performance. The results show that all four calendar anomalies support the AMH, with each calendar anomaly's performance varying over time. We also find that some of the calendar anomalies are only present during certain market conditions. Overall, our results suggest that the AMH offers a better explanation of the behaviour of calendar anomalies than the Efficient Market Hypothesis.