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Holiday Effect on Sensex Returns in the Indian Market: Literature Review

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The understanding of any subject depends on a good knowledge of related literature. A good knowledge of literature helps not only to identify the scope of the subject but also facilitates the study design in an enhanced manner. Hence, a review of the available studies in the field or related to the field of investment in the stock market is presented below.

Holiday Effect is one of the factor that affected on Sensex Returns in the Indian Market which has been studied by Mr. R. Gowri Shankar, Dr. Tomy K. Kallarackal (2016) examine the holiday effect in Indian BSE Sensex Indices. The data collected from BSE Sensex from 31st December 2009 to 28th December 2015. This research considered the preholiday and the post-holiday Sensex return and the influence of six National holidays consider for the study. Data collection for this study is secondary data. With the help of Wilcoxon signed-rank test of non-parametric statistical hypothesis test is used to compare the two related samples. Study found that there is a significant change in the post-holiday Sensex returns compare to pre-holiday Sensex returns.

Day of the week is one of factor that affected return was studied by Allan Muchemi Kuria and Dr. George Kamau Riro (2013), which examines the presence of day of the week effect anomaly in Nairobi Securities Exchange (NSE). Malavalli Nagesh and Sathyanarayana (2015) examines Day-of-the-Week effect anomaly in the emerging stock market of a developing economy like India and Prateek Verma (2016), BSE indices in India in 2016 and observed that investors are more worried about which day of the week is the best day for the trade. Researcher found that BSE Sensex does not show any occurrence of Day-of-the-Week effect or seasonality. The index is efficient and there is no day of the week effect anomaly in Indian stock market. It was also found that Monday returns and Friday returns are not significant while comparing with other days of the week. Several hypotheses have been formulated using the ANOVA model for the study. The analysis shows the presence of the day of the effect in the NSE.

Another Similar anomaly is the turn of the month effect which exists when the average daily return of the turn of the month which is higher than the daily return on the remaining days of the month. Dr. Jay Desai, Nisarg A Joshi (2015) in his study found that mean daily return for stock was positive and higher during the first half of the month than the second half. The study also examines the seasonality effect in Indian Stocks and Indices by various approaches like calendar day approach, day of week approach and week of the month approach. The results of all the approaches reveal that returns were significantly higher on some of the days and period in a month. It was seen that there was no day of the week effect seen in the study. Researcher could find various explanations for the observed anomalies based on past studies, but none could provide adequate explanations for the observed return regularities.

Efficient market hypothesis (EMH) is considered to be bedrock of Market theories on based on the assumptions and are formulated for no arbitrage opportunities, independent and identically distributed. This study examines the existence of the day effect in Indian IT sector. Researcher used descriptive statistics and OLS regression model to study the day of the week effect. The finding confirmed that there was no week effect in Indian BSE IT Index.

Most of the researchers studied about Day of the week effect Anomalies in different stock markets with different results. Stock markets are more volatile market. This research basically for the investors who decided the best trading day, This paper examine the day of the week effect in the emerging stock market in India for the period of January 2001 to December 2012. Five different models have been estimated risk factor. The result found that there was no day of the week effect in intraday stock return. According analysis we found that Monday and Friday give lowest return and Monday become more volatile day was found.

The study on Anomalies in Indian Stock Market “An Empirical Evidence From Seasonality Effect On BSEIT Index” by Dr. Pedapalli Neeraja and Potharla Srikanth (2014) examined the anomalies present in the Indian Information Technology companies stocks and the impact of overall Indian stock market conditions on the Information technology companies stocks. The result shows the Fuller Dickey Augmented test that the returns of India’s IT stocks are more volatile in India’s stock market. The GARCH model exposes that negative returns are best observed in IT during the month of March and April. A similar trend was also found in BSE during the month of January, July and August.

The study was conducted in order to understand some re-occurring trends happening in share market with the specific objectives like to Understand Market Anomalies and their reason for occurrence and to check the existence of Market Anomalies in Indian market by S, Mohammed Safeer, & Dr.S. Kevin, 20148, No one can predict the market exact timing on buying and selling the securities but with the help of technical software can predict the future entry and exist with the help of support and resistance level. Calendar anomalies are some reoccurring which may or may not occur. The study examines the existence of market anomalies in the Indian stock market with respect to BSE SENSEX Index from the year 2008- 2012. The data are tabulated, analyzed and interpreted on monthly basis. For this particular study Five year data of closing price of the companies before and after split was taken for the analysis. Different industries like Bajaj Corporation, HDFC Bank, Jindal steel, Oriental Hotels and Tata steel were selected for studies. For the analysis the statistical tools are used like mean, t-test (before and after split). The study inference that market anomalies is exist in Indian market, effect is very less in Indian market as compare to foreign market, there is a Monday effect reflected in Indian stock market between January 2008 to December 2012. Turn of the month effect and year effect are visible proven but with the help of statistical analysis it has not been proven for the analyzed period. There was no turn of the month effect seen during study periods. Effect of five various stock splits were analyzed and out of five, four companies results are not affect the split effect.

M. Sriram, P. Renuka Devi (2013) studied day of the week effect with autoregressive moving average model with dummy variables for months to test the existence of seasonality in stock returns. The results of the study confirmed the presence of monthly effect in stock returns in India and also supported the tax-loss selling hypothesis.

Holiday Effect is one of the factors that affect Sensex Returns in the Indian Market was studied by Manish.R.Pathak (2013) in order to examine the stock market seasonality effect (month of the year effect and the day of the week effect) in Indian stock market for the S&P CNX Nifty (NSE) and Debasish, S. S. (2012) more specifically for the IT sector. The Analysis periods for the study were from 1st April 2002 to 31st March 2012 and 3rd November 1994 to 31st December 2010. Secondary data has been collected from official site of NSE and employed the daily price series of selected seven IT companies. The study uses Kruskal Wallis test and one way ANOVA and regression coefficient check week of the day and month effect, and for the analysis of trading strategy Kruskal Wallis. The seasonality was not present in Indian stock Market. The Study saw the seven IT companies demonstrated day of the week effect seen on mostly either on Monday, Tuesday or Wednesday. Only in two IT companies, Patni and Wipro evidenced significant Thursday effect. Similarly, it was found that the evidence of week of month effect mostly occur either in 1st week of month, 2nd week of the month or 3rd week of the month.

The effect of the weekend on the Indian stock market was examined by Nageswari.P and Babu .M (2011). The study concludes that the average returns were positive for all days of the week, while the highest was seen on Friday and the lowest was observed on Monday. It also concludes that the day of the week model was not observed in the Indian stock market during the study period.

P. Nagehwari and Dr. M Selvam (2011) carried out a study on the Efficient Market Hypothesis. The study says that Seasonal Effects create higher or lower returns depending on the Time Series. They are called Anomalies because they cannot be explained through traditional asset pricing models. The January Effect, the Day-of-the Week Effect and the Week of the Month Effect etc. are various examples for that. The objective of the paper was to explore the Seasonal Effect on the Indian Stock Market. For the purpose this analysis BSE Sensex index was chosen for a period of ten years from 1st April 2000 to 31st March 2010. The study found that the Day of the Week Effect and Monthly Effect Pattern did not appear in the Indian Stock Market during the study period.

A study entitled An Empirical Analysis of Semi-Monthly Effects: Evidence from the Indian Stock Market, by Nageswari P., Selvam M., Karpagam V. (2011), examined the effect of existence of Semi-Month Effect in the Indian Stock Market. The study found that the average returns in the first half of the calendar month were lower than the average returns in the second half of the calendar during the study period. The document reports a negligible semi-monthly effect in all years, with the exception of 2005-06.

In a Research entitled Day-of-the Week Effect on Indian Stock Market: An Empirical Analysis, Nageswari P., Selvam M. (2010), examined the day of the week on the Indian stock market since the introduction of the Rolling regulation required. The study provides evidence that the market was not able to assess risk in an appropriate way, since it was possible to obtain a higher yield by adopting lower risk and ineffectiveness of this indicated market.

To study whether seasonal anomalies persist in developed and developing markets, Ashish Garg, B.S. Bodla and Sangeetha Chhabra (2010) study about Indian and US markets as representative of emerging and developed markets. The data for study was from January 1998 and December 2007 BSE Sensex and S & P 500 from the US market in order to study the monthly effect, Semimonthly effect, Monday effect and Friday effect. The study uses post hoc analysis and ANOVA, where it was observed that the stock market returns gives high return on Friday than other days of the week. The effect of Monday is seen through the performance of the shares of Friday. The semi-annual effect is the same for both markets: Indian and American. To conclude this study, the efficiency of the stock market is strictly correlated with the allocation of capital resources. Both the effect of the Indian market and the US market are significant. The monthly effect increases stock market pressure and leads to a higher yield in January. But in the case of India in the month of March is the month of tax savings, so the anomaly exists in the Indian stock market. The result for this study indicates the efficiency of the stock market.

The studies on daily returns by different researchers have given different results. Some researchers found that there is positive significance on Monday whereas some found that there is impact of previous day returns on the next day. In a similar type of study, Ankur Singhal (2009) has argued that the daily returns should depend on the day of the week by taking the context of the Indian stock market. The researcher expected returns on Monday should be lower while returns on Friday should be higher than rest other days by studying the ‘weekend effect’.

The performance of annual yields and daily yields in the National Stock Exchange was studied by Selvarani M. and Leena Jenefa (2009), with the help of parametric and nonparametric statistics tests used for to testing the average returns and standard deviations of returns are equal. The study was discovered that the strong effect of month April and January on the NSE return. After the inception of Rolling Settlement system, Friday became more significance. With respect to Day anomalies effect, the effect of Tuesday was more widespread as compare to the Monday effect.

The research entitled A Study on Week End Effects of Stock Return in Indain Stock Indices the authors enlighten the view and investigates that the daily stock returns depend on the day of week in Indian stock market. Skill data base were taken for the study. Data were collected with the help of share opening and share closing price of three indices in India. Indices are BSE Sensex, BSE 200 and S&P Nifty. Data were calculated from 1st April 2003 to 30th April 2008 of daily return. The data collected were analyzed by regression analysis. The finding of the study represent that the return of every day of week during the study period of time by BSE Sensex, S&P Nifty and BSE 200 indexes have similar results. Monday’s yields remained below the rest of the days. Return on Friday remained higher than rest of days in a week. The limitation of the research study was that the researcher considers the cyclical factors instead of the necessary factor and researcher consider the weekly changes in the returns of equity. Monthly changes, seasonal changes and change in intraday returns was not considered.

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Holiday Effect on Sensex Returns in the Indian Market: literature review. (2019, March 12). GradesFixer. Retrieved December 3, 2020, from
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