IIMS Journal of Management Science

Anomalies in Indian Stock Market: Day-of-the-Week Effect

Nikhil Kaushik

First Published 1 Jun 2022. https://doi.org/10.5958/0976-173X.2017.00023.9

Article Information

Volume 8, Issue 3 September-December, 2017

Nikhil Kaushik is currently a Research Scholar, Indian Institute of Forest Management. He can be reached at nikhil.iifm14@gmail.com, nkaushikfpm14@iifm.ac.in

Abstract

The efficient market hypothesis demands that stock prices must efficiently reflect all available information about their intrinsic value. Existing studies on day-of-the-week effects focus majorly on the developed nations with a little focus towards emerging market. To deal with this gap in the literature, an empirical investigation of day-of-the-week effect was conducted using large-cap, mid-cap and small-cap indices of Indian stock market from the period 2012–2015. Generalised Autoregressive Conditional Heteroscedasticity model was applied to study the day-of-the-week effect on stock returns and volatility. The empirical results from the study showed Monday effects in small-cap indices and absence of day-of-the-week effect in mid-cap and large-cap indices. The average return on Monday of small-cap indices is statistically significant and higher than average return on Monday of mid-cap indices and average return on Friday of large-cap indices. The results of this paper predict profitable propositions for traders on future prices of small-cap indices. However, the situation was concluded to be not very lucrative for mid-cap and large-cap indices.

Keywords

Day-of-the-week effect, Weak-form efficiency, GARCH model, Small-cap indices, Mid-cap indices, Large-cap indices

JEL Classification Codes: C22, C58, G12, G14

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