Seasonality in Stock Returns: A Study of Emerging and Developed Stock Markets

Abstract

The seasonal patterns in stock returns have been extensively investigated and documented, yet their logic and practical applicability is still being questioned. The objective of this paper is to examine the existence of day-of-the-week effect across stock markets of six countries — three developed and three emerging economies. Popular stock market indices namely Dow Jones (US), FTSE (UK) and Nikkei (Japan) represent developed stock markets while Bovespa (Brazil), Heng Seng (Hong Kong) and Nifty (India) represent emerging stock markets. Daily closing values of these indices have been analyzed over fifteen years period commencing from January 1994 to December 2008. A set of parametric and non-parametric tests have been used to examine the equality of mean returns across various days of the week. The study shows that developed stock markets are less volatile and more efficient than emerging stock markets.

Keywords

Efficient Market Hypothesis Calendar Anomaly Day-of-the-Week Effect Emerging Stock Markets

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