A Study of Day of the Month Effect in S&P CNX Nifty 50

Abstract

A curious seasonal anomaly found in finance is the turn of the month effect, where the daily mean return of stock market at the end of a month and beginning of a month is significantly higher than the average daily return of all the days of a month. There have been evidences that certain months in a year deliver significantly higher returns. Similar anomalies are found for week days also, where some days in a week deliver above average returns. Seasonal anomalies for researchers have been a subject of great interest and lot of literature is available worldwide. This paper examines presence of presence of day of the month effect in leading stock indices of India S&P CNX Nifty 50. We have tested the presence of day of the month effect from the year 1994 in the research. We found that the Nifty return data is not normally distributed and skewed. To test the statistical significance of difference in date wise return we have used Kruskal-Wallis Test. To identify the statistically significant days, we have used Z Statistics. We found that the date wise return in Nifty to be statistically different and there exists opportunity to earn excess return due to day of the month anomaly.

Keywords: seasonality, day of the month effect, stock market inefficiencies, efficient market hypothesis, portfolio management, market timing, stock trading, EMH

JEL Classification: G11, G14, G15, N20, N22, N24, N25, N26