Disappearing seasonal anamolies:An empirical evidence for month of the year effect in

Indian stock market

In the context of stock markets,seasonal effects that contradict the efficient market hypothesis
have been documented over several years.These effects are trends seen in stock returns where
returns tend to rise and fall during particular season.They are called anamolies,because they
cannot be explained by traditional asset pricing models.Seasonality would be month-of-the-year
effect,day-of-the-week effect,intra month effect,holiday effect,haloween effect and festival
effect.In this paper the author discusses about the month of the year effect. In month of the year
effect the exchange traded equities tend o produce abnormal returns during particular months of
the year.
Objective:To study whether the mean returns are constant across all months of the year.
Research Methodology: Here the month of the year effect is tested at two levels:Macro level
and Micro level.Macro level seasonality is assessed in major Indian stock market indicators
namely SENSEX,BSE100 and NIFTY.At micro level 43 companies traded in BSE and NSE are
examined for the period of January 2000 to December 2008.Both parametric and non parametric
tests have been used to test whether the mean returns are constant across all months of the
year.The non parametric tests have been employed to test the patterns.Statistical tools like
mean,Sd,parametric tests like kruskall-wallis,Skewness and kurtosis have been calculated to
examine the seasonality.
Conclusion:
Convenional wisdom states that the stock market is random,that is there are no patterns or
mechanisms which can be used to predict the market movements up or down.The theory of
market anamolies states just opposite.This can be used less risky investment method.Sesonal
investing is a long term starategy based on long term factors which have nothing to do on short
term predictions about the market direction.
Stock Market Seasonality in an Emerging Market
The objective of this paper is to explore the day-of-the-week effect on the Indian stock market
returns in the post-reform era. Till the late seventies, empirical studies provided ample evidence
as to the informational efficiency of the capital markets advocating futility of information in
consistently generating abnormal returns. However, later studies identified certain anomalies in
the efficient market postulate. One major anomaly brought forth was the calendar-related

abnormal rates of return. Various studies in this domain empirically demonstrated, through
parametric and non-parametric tests on the stock returns data, that turn of the year, month, week,
and holidays have consistently generated abnormal equity returns in both the developed and
emerging markets unrelated to the attendant risks. Studies on the Indian stock markets calendar
anomalies,especially in the post-reform era, are very few. In an attempt to fill this gap, this study
explores the Indian stock markets efficiency in the weak form in the context of calendar
anomalies, especially in respect of the weekend effect.
Daily returns generated by the SENSEX, NATEX, and BSE200 during January 1st 1996 to
August 10th 2002 comprising a total of 1,667 observations for each of the indices are considered
for testing the seasonality. While most of the studies have considered the returns of one of the
major indices based on the closing values, this study examines the multiple indices for possible
seasonality. An analysis of returns pattern of multiple indices is helpful in identifying the
presence or otherwise of the stock market seasonality associated with various portfolios and for
testing the efficacy of investment game based on the observed patterns of the returns. This study
employed the daily mean index value for generating the daily returns to relax the implied
assumption of the earlier studies by considering the closing values of the indices that
trading is done at the closing values. A non-parametric test Kruskall-Wallis test using H
statistic is employed for testing the seasonality in the Indian stock market returns.
DATA AND METHODOLOGY
The PROWESS database provides information regarding the daily opening, high, low, and close
values of the SENSEX, NATEX, and BSE200 indices among other indices. We have used this
data related to the period spanning a little over 80 months from January 1st 1996 to August 10th
2002 comprising a total of 1,667 observations for each of the indices.
The study aims at exploring the presence of seasonality in the Indian stock market returns during
the post liberalization period. Using the log returns data on three popularly used BSE indices
SENSEX, NATEX, and BSE200 for the period January 1st 1996 to August 10th 2002, the
study provides evidences as to the presence of seasonality across the days of the week. It
confirms the conclusions of earlier studies as to the leptokurtic distribution of equity returns;
presence of highest variance on Mondays; weekend effect, and regularity of returns across the
indices. It also confirms the conclusion as to the futility of trading strategy based on the observed
regularity of returns.
Day-Of-The-Week in different stock markets:
new evidence on model-dependency in testing seasonalities in stock returns
This paper investigates the day-of-the-week effects in the stock indexes of both developed and
emerging markets as well as the MSCI world index from march 2002 to may 2008 using
regression models. The results show many daily effects, occurring from Monday to Friday, which
are different from the weekend effect. No consistent daily effects were found for either returns or
volatility in any market by any of the tested models, and the presence of effects seems to be
model-dependent. Surprisingly, the MSCI world index exhibits a strong positive return on
Monday and Wednesday. The leverage effect on the arrival of new information is reliably found
in three developed markets and the MSCI world index.
The present study investigates the patterns of daily anomalies in the stock indexes of eight
markets and the MSCI world index (Morgan Stanley Capital International world stock price
index) for the period between March 2002 and May 2008. The first contribution this paper makes

to the current literature is to apply regression models to eight stock indexes that include
developed markets the US, the UK, France, Japan, Hong Kong and Singapore; emerging
markets Malaysia and Vietnam; and the MSCI world stock market index, to test whether
patterns of daily anomalies discovered in the international markets are model-dependent. This
study has the advantage of being broad in scope, as opposed to the majority of studies in the
current literature, which are country specific or focus on a small group of countries with a
narrow geographical coverage. The second contribution of this paper is to provide evidence of
persistent patterns in day-of-the-week effects on these markets. Thirdly, the paper enhances the
established literature by providing the most recent analysis of these markets.Here regression
models namely OLS models,GARCH models,Modified GARCH models,Modified T-GARCH
models,Modified E-GARCH Models are used.
Stock Market Seasonality: A Study of the
Indian Stock Market (NSE)
The day-of-the-week effect continues to be one of the more interesting stock market anomalies to
study because the existence
of significant day-of-the-week effects would be very useful for developing profitable trading
strategies. Investors could buy stocks on days with abnormally low returns and sell stocks on
days with abnormally high return. Several empirical studies have studied the phenomena of
calendar effects in stock markets, where returns tend to show higher (or lower) than average
returns is specific calendar periods. Calendar effects are anomalies in stock returns that relate to
the calendar, such as the day-of-the-week, the
month-of-the-year, or holidays, and well-known examples are the Monday effect and the January
effect. Such anomalies cast doubts to the efficient market hypothesis
OBJECTIVES:
The objectives of the study are as follows:
a) To examine days of the week effect in the returns of S&P CNX Nifty
b) To examine the seasonality in monthly returns of S&P CNX Nifty.
In order to examine the stated hypothesis, daily closing prices of the National stock exchange of
Indias general index NSE
nifty were utilized for the period 1/04/2006 to 31/3/2012 (Day of week effect) and 1/04/2002 to
31/3/2012(Month of year effect).
The presence of the day of the week effect in stock market returns has been one of the hotly
debated issues in the finance
literature. In this study, researcher tried to examine the seasonality of stock market in India. I
considered the S&P CNX Nifty as the
representative of stock market in India and tested whether seasonality is present in Nifty return
using daily and monthly data sets. The study found that daily and monthly seasonality are not
present in Nifty return. The reason behind this non existence of the day effect may be due to the
increased volatility,increased awareness among Indian investors, Globalization of Indian
Economy, reach of Media, emergence of Derivatives segment and Increase in disposable Income.
AN EMPIRICAL ANALYSIS OF SEMI-MONTH AND TURN OF THE MONTH
EFFECTS IN INDIAN STOCK

MARKET
The efficiency of the capital market raises various issues all over the world. Earlier research
studies give evidence that the capital markets are informational
efficient and hence, cannot outperform the market consistently on the basis of price change
predictions. However, some researchers have also brought into light
seasonal effects/calendar anomalies in the developed markets. This paper investigates one such
anomaly (Semi-month and Turn of the month effects) in an
emerging Indian Capital Market. The S&P CNX Nifty and BSE Sensex Index data have been
collected and analyzed for a period of six years from 1st January 2005 to
31st December 2010. For the purpose of this study, S&P CNX Nifty and BSE Sensex Index
were considered as sample since these two indices are important indices of the Indian Stock
Market in India. Besides, these indices are considered to be the best indicators of the
performance of the whole economy. Hence, this study considered these
Indices.
The analysis of the study found that the semi-month and turn of the Month Effect not exists in
Indian Stock Market during the study period.
This paper examined the existence of Semi-month and Turn of the Month Effect (a calendar
anomaly) for S&P CNX Nifty and BSE Sensex in the Indian Stock
Market. The finding of the Study shows that the Semi-month and Turn of the Month Effect was
not prevalent in the Indian Stock Market during the study period.
By analyzing these anomalies in Indian Stock Market, it is concluded that most of the cash flows
come in to the Indian Stock Market in the first few days of the
month, which induces stock prices to move upward. Hence, the Indian Stock Market cannot be
treated as fully efficient till now. The existence of these
anomalies may provide opportunities to formulate profitable trading strategies so as to earn the
abnormal return.

Stock Market Seasonality: A Study of Calendar Anomalies in the Indian Stock Market
The Market Efficiency explains the relationship between information and the share prices in the
market. The Calendar Anomalies are the best-known examples of inefficiencies in the Capital
Markets. The existence of the calendar anomalies is a denial of the weak form of efficient market
hypothesis which states that stock returns are time invariant which means that there is no shortterm seasonal pattern in the stock returns. The subsistence of seasonal pattern in the stock return
infers that a market is inefficient and investors should be able to earn abnormal return. Thats
why finance researchers have been interested to find out the existence of the calendar anomalies
or seasonality in the stock returns in different markets.
The information transmission mechanism ensures that the stock returns across all days of the
weeks and months are equal and the market participant, the rational financial decision-maker,
cannot earn any extra-normal profits. It is important to note that there are variations in volatility
of stock returns by the Day-of-the Week, Month of the Year and Semi-Month. Besides, a
high (low) return is associated with a correspondingly high (low) volatility for a given day. If the
investors can identify a certain pattern in volatility, then it would be easier to make investment

decision based on both returns and risk. It is against this background that an attempt has been
made here to examine Calendar Anomalies in the Indian Stock Market.
The specific objective of this study is to investigate the existence of day of the week effect
anomaly in Bombay Stock Exchange (BSE) which is the prime stock market in India. The results
of this study will have important practical implications for capital market participant like
investors, managers and regulatory authorities.
Seasonal anomalies in stock returns: A study of developed and emerging markets
In this paper the author attempts to examine whether seasonal anomalies still persist in the
developed and developing markets. He strives to identify the existence of market inefficiency. If
any, in the form of seasonal anomalies in return offered by stock markets over the last decade.
Increased use of modern information technology and recent reforms in the operating mechanism
of financial markets, have resulted in market efficiency. For the study the Indian and US markets
are taken as the representative of emerging and developed markets. The period of study ranges
from Jan 1998 to Dec 2007.The study examines 5 types of anomalies namely Turn of the month
effect, Semi monthly effect, Monthly Effect, Monday Effect and Friday effect. The researcher
used return formula to calculate the returns. The significance of the difference between average
returns was found with T test. Significant difference between monthly returns was computed
using One-Way Anova.For the one to one comparison between months Post-Hoc Test is
used.krushkal Wallis test used to measure the significance of variation between the two sets of
data (Monday and rest of the days) The analysis reveal that it is obvious that some kind of
anomalies are persistent in both the markets. Hence the Stock markets are not yet free from
Seasonal anomalies despite of increased use of information technology and numerous regulatory
developments.The Stock market are not fully efficient.Thus the existence of the anomalies may
provide opportunities to formulate profitable trading strategies so as to earn increased return that
is not commensurate with the risk.
Types of Anomalies:
The three main types of anomalies are a) calendar anomalies b) fundamental anomalies c)
technical anomalies. Calendar anomalies exist due to deviation in normal behaviors of stocks
with respect to time periods. These include turn-of-year, turn-of-minh,turn-of week effect,
weekend effect, Monday effect,Holiday effect,Monthly Effect,Semi-Monthly Effect and January
effect. There are different possible causes of theses anomalies like new information is not
adjusted quickly, different tax treatments, cash flow adjustments and behavioral constraints of
investors.Another type is fundamental anomalies which includes that prices of stocks are not
fully reflecting their intrinsic values.These include value versus growth anomaly dividend yield
anomaly, overreaction anomaly, price to earnings ratio anomaly and low price to sales anomaly.
Value strategies outperform than growth stock because of overreaction of market and growth

stocks are more affected by market down movement. Dividend yield anomaly is that high
dividend yield stocks outperform the market. Stocks having low price to earnings ratio
outperform. Technical anomalies are based upon the past prices and trends of stocks. It includes
momentum effect in which investors can outperform by buying past winners and selling past
losers.Techncial analysis also includes trading strategies like moving averages and trading breaks
which includes resistance and support level. Based upon support and resistance level investors
can buy and sell stocks.

A Study on Market Anomalies in Indian Stock Market

(Archana.S,Mohammed Safeer, IJBARR,ISSN No.2347-856X,Volume.1,Issue.3,March 2014)

In financial markets anomalies refers to situations when a security or group of securities perform
contrary to the notion of efficient markets,where security prices are said o reflect all available
information at any point in time.With the constant release and rapid dissemination of new
information sometimes efficient markets are hard to achieve and even more difficult to
maintain.There are many market anomalies some occur once and disappear and some are
continuously observed.Thus the author evokes the desire to investigate existence of the market
anomalies in Indian market.The data is taken from the year Jan 2008 to Dec 2012 by analyzing
weekend effect,Turn of the month effect,Turn of the year Effect-both in terms of price and
volume and stock split effect of five selected companies.This study has important implications in
understanding the market anomalies,its effects and the way it can influence investor decisions.