Existence of Day-of-the-Week Effect: Evidence from Indian Stock Market

Abstract

This study is an attempt to measure Day-of-the-Week Effect on the return and volatility of BSE and NSE indices for the period of 2005 through 2014. Along with the descriptive statistics, t-test and ANOVA has been used to capture mean deference in returns for the trading days Monday through Friday. Mean returns of only one index, Nifty Junior, has found statistically significant while using t-test whereas, no such difference was observed in any of the index (BSE and NSE) in ANOVA. To confirm the findings of t-test and ANOVA, an econometric model AR (1)-GARCH (1, 1) has been used. In contrast of the findings of the other indices, return on Monday for BSE Small Cap has found statistically significant. It has also observed that, volatility on Monday for return on BSE Small Cap is statistically significant. Return on Tuesday, for BSE Small Cap and BSE Mid Cap, has found negative and statistically significant. Returns on these two indices have also found negatively volatile on Tuesday. Wednesday effect has only observed on Nifty Junior but, there is no volatility captured on Wednesday for Nifty Junior. Return on Nifty Junior has also found positive and statistically significant on Friday but, there is no volatility captured for return on Nifty Junior on Friday.

Keywords: Calendar Anomaly, Day-of-the-week effect, Volatility, ANOVA, Auto Regression, GARCH.

JEL Classification: C12, C58, G,11, G14.