November Effect: An Example of Calender Anomaly in Indian Stock Market

Abstract

This study investigates the month-of-the-year in Indian stock in recent years using monthly data on Indian market index and some other sectoral indices. It accounts for the time-varying volatility of the Indian stock market, at both the market and sectoral level, using the GARCH model and GARCH-M model. This study looks for the presence of calendar anomaly with asymmetric market reactions using TARCH model. It confirms the presence of a significant November effect at both the levels that cannot be explained by the time varying volatility of stock return. A similar trend also persists at the sectoral level. Presence of such seasonal anomaly in the form of a November effect could have significant bearing for the policy makers as well as for individual investors for designing profitable trading strategies. The study attempts further to account for such seasonality in stock return in Indian context.