Monday Effect and Stock Return Seasonality: Further Empirical Evidence

The Business Review, Cambridge, Vol. 10, No. 2, pp. 282-288, Summer 2008

15 Pages Posted: 12 Mar 2008 Last revised: 24 Oct 2010

See all articles by Dr. Rengasamy Elango

Dr. Rengasamy Elango

affiliation not provided to SSRN

Nabila Al Macki

Majan University College - Department of Business Management

Date Written: 2008

Abstract

This study investigates whether the anomalous 'weekend effect' found in many developed and developing markets around the world is also present in the rapidly emerging Indian equity market. We use the real-time data of three of the major indices of the National Stock Exchange of India (NSE) for 1999-2007 period. Standardizing the data, we apply a set of descriptive and inferential statistics on the above three indices. Our analysis produced mixed results indicating that the Monday returns are negative and low in the case of two out of three indices. The K-W test, which is a non-parametric test applied to examine whether the ranks of mean returns for each day of the week are equal, shows evidence of a statistically significant difference in the case of one sample index, CNX S&P Nifty Junior. The implication is that the weekend effect is present in small stocks. Dummy variable regression, which again examines the weekend effect shows that Monday returns are negative in one of the bench-mark indices, the NSE S&P Nifty confirming that the Indian Market is inefficient and could be exploited to maximize returns. Surprisingly, Wednesdays have yielded the highest mean returns across indices. However, volatility is also higher in these stocks. These findings offer interesting opportunities for individual investors and portfolio managers to place bid/ask orders in order to maximize their returns. However, due caution needs to be exercised while making the above decisions.

Keywords: Monday Effect, Market Anomalies, Seasonality, K-W-Test, Dummy Variable Regression, Mann-Whitney Test

JEL Classification: G11, G15

Suggested Citation

Elango, Rengasamy and Al Macki, Nabila Mohammed, Monday Effect and Stock Return Seasonality: Further Empirical Evidence (2008). The Business Review, Cambridge, Vol. 10, No. 2, pp. 282-288, Summer 2008, Available at SSRN: https://ssrn.com/abstract=1103627

Rengasamy Elango (Contact Author)

affiliation not provided to SSRN

Nabila Mohammed Al Macki

Majan University College - Department of Business Management ( email )

P.O. Box 710
Muscat, Ruwi 112
Oman

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