An Empirical Study on Day-of-the Week Effect in Indian Stock Market During Different Settlement Regimes Using Garch Framework

Vishal Kutchu
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Vishal Kutchu: Associate Professor Amjad Ali Khan College of Business Administration Hyderabad, India

Indian Journal of Commerce and Management Studies, 2012, vol. 3, issue 3, 85-91

Abstract: The presence of calendar anomalies such as day-of-the-week effect can help investors to earn abnormal returns and indicates market inefficiency. In this study we examine whether the market microstructure reforms such as introduction of rolling settlement mechanism by SEBI did increase efficiency of the Indian Stock Market. This study tests the presence of the day of the week effect on stock market returns for the period of January, 1995 through July, 2012 using GARCH (1,1) Model for three indices viz., S&P CNX NIFTY (Nifty), CNX Nifty Junior and S&P CNX 500 (NSE-500). The sample period is divided into two sub-sample periods comprising a Pre-Rolling settlement period and a Post–Rolling settlement period. Our results support previous research findings that returns are the highest on Friday after introduction of rolling settlement.

Keywords: weak-form efficiency; calendar anomalies; rolling-settlement; GARCH; dummy variables (search for similar items in EconPapers)
Date: 2012
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