Illusion or Reality: Testing the Day-of-the-Week and Month-of-the-Year Effect for Indian Stock Market

Abstract

This paper empirically investigates the day-of-the-week and month-of-the-year effect for Indian stock markets. The dummy variable regression model has been used to examine the existence of anomalies for BSE 100 index over the period 1st Jan 1993 to 31st March 2015. The study uses monthly and daily data on BSE 100 to examine month-of-the-year and day-of-the-week effects respectively. The study uses data science approach where both the calendar anomalies have been tested on raw data (raw returns) and data without outliers (returns without outliers). The study finds no day-of-the-week effects in the BSE 100 returns but reveals negative April effect in the raw data. The average return for April is statistically lower as compared to others month of the year. Interestingly, when data is considered without outliers, all anomalies in the data gets disappear and it is found that market provides consistent returns across the months of the year and days of the week. The present findings suggest that Indian stock market is weak-form efficient (at least immune from calendar effects).