An Examination of the Weekdays’ Anomaly in the Trading Behavior of Institutional Investors in the Post-Demonetization and GST Regime in India

Abstract

This study analyzed the trading activities of foreign portfolio investors (FPIs) and Indian mutual funds (IMFs) across weekdays. The present study aimed to enrich the literature related to the efficient market hypothesis and day-of-the-week anomaly present in the trading behavior of FPIs and IMFs across weekdays. The study examined the daily purchasing, selling, and net investing activities of FPIs and IMFs in equity instruments of the Indian capital market for 3.1 years, beginning November 1, 2016 and ending November 30, 2019. During this period, the Indian capital markets adjusted to the up-and-down sentiments of market players in the context of demonetization and GST regimes. This study aimed to achieve two objectives, that is, examining the day-of-the-week effect on trading activities of FPIs and IMFs and comparing the trading patterns of FPIs and IMFs on individual trading days with the rest of the weekdays with the help of autoregressive dummy variable regression, ANOVA, and independent-sample t - test. It was empirically determined by the present study that there was a day-of-the-week effect present in the behaviors of both foreign and domestic institutional investors. Monday, Thursday, and Friday were ascertained to have the most significant impact on the trading activities of institutional investors. Hence, individual investors can avail the opportunities to reap extraordinary returns from the Indian capital markets by closely monitoring institutional investors’ trading activities.