Day-Of-The-Week Effect And Indian Stock Market

Abstract

The current study contributes to the literature by considering the impact of capital market reforms, especially rolling settlement effect on the trading days of the week, on Indian stock exchanges as the stock market was full of fluctuations and different capital reforms were undertaken during the period of fourteen years from January 1992 to October 2005. The study is based on daily closing prices of Sensex. The results of descriptive and ARIMA (Autoregressive Integrated Moving Average) tests indicate the presence of weekend effect during the aggregated time period, i.e. negative Monday returns and positive Friday returns, consistent with Cross (1973), French (1980), Gibbons and Hess (1981), Rogalski (1984), Jaffe and Westerfield (1985), and Chaudhury (1991). For the period of pre-rolling settlement, i.e. 1996-2001, Wednesday-Thursday and Wednesday-Friday returns are significantly correlated and for the period of post-rolling settlement, i.e. 2001-5, Friday-Monday, Tuesday-Friday, and Wednesday-Friday returns are significantly correlated.