A Study of Seasonality Based Trading Strategy for Indian Stocks and Indices

Capital Markets: Market Efficiency eJournal, Vol. 3, No. 36, March 24, 2011

25 Pages Posted: 7 Mar 2011 Last revised: 18 May 2011

See all articles by Dr.Jay Desai

Dr.Jay Desai

B.K.School of Business Management, Gujarat University

Nisarg A Joshi

Shri Chimanbhai Patel Institute of Management & Research

Atul Chokshi

Kunvarji Finstock Pvt. Ltd.

Dr. Ashvin Ramchandra Dave

Pandit Deendayal Petroleum University

Date Written: March 7, 2011

Abstract

A curious seasonality reported in finance is the monthly effect which implies that the mean daily return for stock is positive and higher during the first half of the month than the second half. Another related anomaly is the turn of the month effect which is said to exist when the average daily return at the turn of the month is significantly higher than the daily return on the remaining days of the month. This paper examines seasonality effect in Indian Stocks and Indices by calendar day approach, day of week approach and week of the month approach. The results of all the approaches reveal significantly higher returns on some of the days and period in a month. The day of the week effect is found to be absent in our study. Various explanations for the observed anomalies have been considered based on past studies, but none could provide adequate explanations for the observed return regularities. The introduction of derivatives segment in India may have created a pattern near expiry. However, based on the findings, the study tries to evolve certain trading strategies which could benefit in the decision making of the investors concerned with timing of the stock market.

Suggested Citation

Desai, Jay and Joshi, Nisarg A and Chokshi, Atul and Dave, Dr. Ashvin Ramchandra, A Study of Seasonality Based Trading Strategy for Indian Stocks and Indices (March 7, 2011). Capital Markets: Market Efficiency eJournal, Vol. 3, No. 36, March 24, 2011. Available at SSRN: https://ssrn.com/abstract=1829956

Jay Desai

B.K.School of Business Management, Gujarat University ( email )

Navrangpura
Ahmedabad, Gujarat 380009
India

HOME PAGE: http://www.jaydesai.net

Nisarg A Joshi (Contact Author)

Shri Chimanbhai Patel Institute of Management & Research ( email )

Opp. Karnavati Club,
S.G. Highway
Ahmedabad, 380015
India

Atul Chokshi

Kunvarji Finstock Pvt. Ltd. ( email )

Shyamak Complex, B/H Kamdhenu Complex
Ambavadi
Ahmedabad, Gujarat 380006
India
+917966669000 (Phone)

HOME PAGE: http://www.kunvarji.com

Dr. Ashvin Ramchandra Dave

Pandit Deendayal Petroleum University ( email )

Raisan
Gandhinagar
Gandhinagar, 380015
India
+91-79-23275237 (Phone)

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