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A STUDY ON RISK OF STOCK RETURNS BY THE DAY OF THE WEEK IN INDIAN

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Alochana Chakra Journal ISSN NO:2231-3990

A STUDY ON RISK OF STOCK RETURNS

BY THE DAY OF THE WEEK IN INDIAN STOCK MARKET

Dr. M. Kalimuthu*1
Assistant Professor, Department of Commerce with Professional Accounting
Dr. N. G. P. Arts and Science College
Coimbatore – 641048
Tamil Nadu, India
Email Id: [email protected]
Contact Number: 8610860915

Dr. S. Muruganandam **2

Assistant Professor, Department of Commerce
Dr. N. G. P. Arts and Science College
Coimbatore – 641048
Tamil Nadu, India

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A STUDY ON RISK OF STOCK RETURNS

BY THE DAY OF THE WEEK IN INDIAN STOCK MARKET

Abstract: This paper is devoted to testing the risk and anomalous effect on the analysis of stock returns by the day
of the week in Indian stock market. The Indian Capital Market plays a major role in Indian Economy. The Securities
Exchange Board of India (SEBI) has provided a source of confidence to the investors with its regulatory measures.
Hence, the market participants and rational financial decision makers cannot earn any extra profit than normal profit.
It is to be noted that the returns constitute only one part of the decision making process. Another part of decision
making is the calculation of risk of returns. The objective of the present study is to examine the day-of-the week
effect in the returns of Indian stock market. Hence, the hypothesis that the all sub-periods “There is no significant
difference in stock return across days of the week” is rejected. So there was strong significant positive relationship
between Mondays through Friday. The dummy variable regression analysis of returns for all the 22 companies and the two
indices show evidence for significant variation across all days of the week that the all sub-periods.

Keywords: Day of the Week, Risk, Returns, Stock Market, Seasonal Variations.

1. INTRODUCTION

The Indian Capital Market plays a major role in Indian Economy. As India is a

developing country, now a day‟s many people are interested to invest in financial markets

especially on equities to get high returns, and to save tax in honest way. The Indian capital

market is one of the oldest and largest capital markets of the world. The Indian capital market

has witnessed a tremendous growth. The rapid industrialization in the country after independence

has given raise to the capital market. The equity market of the country has contributed for the

drastic growth in the economy of the country. Now a day, a marked awareness in equity

investment is evident throughout the world. Equity shares serve as a first-class medium for

investment. They bring in reasonable returns with prospects of capital appreciation. They are

safe, easily marketable and have liquidity.

The security markets in India have made enormous progress in developing sophisticated

instruments and modern market mechanisms. The real strength of the Indian securities market

lies in the quality of regulation. The Securities and Exchange Board of India (SEBI) is an

independent and effective market regulator. It has put in plane sound regulations in respect of

intermediaries, trading mechanism, settlement cycles, risk management, derivatives trading and

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takeover of companies. The growing number of market participants, the growth in volume of

securities transaction, the reduction in transaction costs, the significant improvement in

efficiency, transparency as well as safety and the level of compliance with international

standards have earned for the Indian securities market a new respect in the world.

Fundamental analysis and technical analysis can co-exist in peace and complement each

other. Since all investors in the stock market want to make the maximum possible profits, they

just cannot afford to ignore either fundamental or technical analysis. The Indian Financial

markets play a crucial role in economic development through the saving and investment process,

which is known as capital formation. A vibrant competitive financial market is a necessary

constituent to the given benefits of liberalization policies and sustain in the on-going reforms.

Many financial reforms were undertaken to improve the efficiency and stability of the financial

system.

1.1 Literature Review

Herbst et al (1992) examine the informational role of the end-of-day returns in the stock index

futures for the period 1982 to 1988. Volatility is estimated from the standard deviation of the

returns. It is shown that the end of day return volatility is positively correlated to the next day's

spot returns.

Sunil Damodar (1993) evaluated the „Derivatives‟ especially the „futures‟ as a tool for short-

term risk control. He opined that derivatives have become an indispensable tool for finance

managers whose prime objective is to manage or reduce the risk inherent in their portfolios. He

disclosed that the over-riding feature of 'financial futures' in risk management is that these

instruments tend to be most valuable when risk control is needed for a short- term, i.e. for a year

or less. They tend to be cheapest and easily available for protecting against or benefiting from

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short term price. Their low execution costs also make them very suitable for frequent and short

term trading to manage risk, more effectively.

Donald E Fischer and Ronald J. Jordan (1994) analyzed the relation between risk, investor

preferences and investor behaviour. The risk-return measures on portfolios are the main

determinants of an investor's attitude towards them. Many investors seek more return for their

assumed additional risks. The conservative investor aims for huge increase in return by

assuming small increase in risk. The more aggressive investor will accept lesser increase in

return for the huge increase in risk. They concluded that the psychology of the stock market is

based on how investors form their judgments about uncertain future events and how they react to

these judgments.

Ghose T.P. (1998) reviewed VAR (Value at Risk). There are two steps in measuring market

risk, the first step is computation of the DEAR, (The Daily Earning at Risk) the second step is

the computation of the VAR. He also reviewed the measurement of price sensitivity. He stated

that price sensitivity could be measured by modified duration (MD) or by cash flow approach.

Indu Salian (1999) reviewed risk management of the financial sector. She opined that managing

financial risk systematically and professionally becomes an important task, however it may be

difficult. All risks are to be monitored within reasonable limits. He revealed that tested risk

control systems are today available virtually off-the-shelf and can be made universally applicable

with a little bit of judgment and modification. While discussing on financial sector reforms

introduced in 1992-93 and its effect on risk management, he revealed that reforms would

necessarily have transition risks and volatility. And margins will get squeezed and the cushion to

absorb risk will get reduced. Then management of risk requires strong risk control. He concluded

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that if we are able to manage the transition phase of the reforms and upgrade our infrastructure

for improved risk management capabilities, we are certain to come out and go ahead.

Min and Najand (1999) investigated lead and lag relationship in returns and volatilities between

cash market and KOSPI 200 futures interactions. This study depended on some ten-minute's

price data belonging to the periods of 3 May 1996 and 16 October 1996 when futures

transactions were introduced over KOSPI 200. Granger causality analysis was used in the study.

As for the analysis results; futures market leads the cash market by as long as 30 minutes. The

trading volume has significant explanatory power for volatility changes in both spot and futures

markets. Futures transactions have stronger influence than cash transactions and the futures

transactions have stronger influence over cash market volatility.

Rajagopala Nair and Elsamma Joseph (2000) revealed the various risks experienced by

investors in corporate securities and the measures adopted for reducing risks. They opined that

calculated risk might reduce the intensity of loss of investing in corporate securities. As per their

study, many investors are holding shares of those companies that are non-existent at present.

They opined that investors may accept risks inherent in equity, but they may not be willing to

reconcile to the risk of fraud. Promoters should not be allowed to loot the genuine investors by

their fraudulent acts. They observed that political uncertainties and frequent changes in the govt.

have put the investors in an embarrassing state of mind. They stated that most of the investors

follow the policy of 'wait and watch' the political situation before making an investment decision.

1.2 Statement of the Problem

In recent years, investments in stocks are picking up with the people in India. The

economic growth and its liberalization have brought-in investors from other countries too. The

explosive growth of communication facilities and information flow, higher level of liquidity with

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the public and intensive brokerage activities have attached people to Capital market. The

Securities Exchange Board of India (SEBI) has provided a source of confidence to the investors

with its regulatory measures.

An efficient Capital market can straight away process the information and it will be

reflected on security prices. This Information Transmission Mechanism ensures that the stock

returns across all Days of the Weeks and Months are equal. Hence, the market participants and

rational financial decision makers cannot earn any extra profit than normal profit. It is to be

noted that the returns constitute only one part of the decision making process. Another part of

decision making is the calculation of risk of returns. It is important that there are variations in

risk of stock returns by the Day-of-the Week and Month of the Year. In this vista, an attempt has

been made by the researcher through the present study to analyse the seasonal variations of stock

returns in Indian Capital Market and to come out with implications to trim down the existing

flaws.

1.3 Significance of the Study

There has been a substantial growth in the Indian economy since the liberalization policy

of 1991 was ushered. It has opened the gates of restriction and prepared the world as a market

both for foreign investors in India and Indian investors abroad. For making investment one

should know how the investment is made, which are the areas in which it should be made and in

what proportion and what are the possible risks and returns. Stock prices are not steady all the

times. The Indian stock market is always uncertain. A stock picker carefully purchases securities

based on a sense that they are worth more than the market price. Security analysis gives a clear

picture of the pros and cons involved in making a particular kind of investment. It provides the

investors a competitive advantage over other investors.

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A better understanding of the stock market will facilitate allocation of financial resources

to the most profitable investment opportunity. The behaviour of stock returns will enable the

investors to make appropriate investment decisions. The fluctuations of stock returns are due to

several economic factors. In the line of attack, the volatility in portfolio flows having been large

during 2007 and 2008 as the impact of global financial turmoil has been felt particularly in the

equity market. Hence, it has become imperative at this juncture to study the seasonal variations

of stock returns in Indian Capital market for five years both before and after the global recession.

1.4 Objectives of the Study

` To examine the day-of-the week effect in the returns of Indian stock market.

1.5 Hypotheses of the Study

There is no significant difference in stock returns among the different trading days of the

week.

2. MATERIALS & METHODS:

2.1 Methodology

The present study is focusing on the seasonal variations of stock returns in Indian Capital

market. The research method used for the study is described review of conceptual issues,

formulation of an exploratory model and its testing. The study is based on secondary data

collected from both Bombay Stock Exchange and National Stock Exchange websites.

2.2 Selection of Sample

The closing prices of stocks have been collected for the present study from BSE and NSE

websites over a period of 10 years from 2002 to 2012 for 22 companies out of SENSEX 30

companies. Initially, it was decided to consider all the 30 companies which are listed in Bombay

Stock Exchange SENSEX. But, finally 22 companies were selected on account of non-

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availability of proper data for the remaining eight companies. The Indices viz., Sensex and

NIFTY have been collected from BSE and NSE websites.

2.3 Period Covered

The study period has been divided into two sub-periods as „1st April 2002 to 31st March

2007‟ and „1st April 2007 to 31st March 2012‟ based on SENSEX. The Daily share price data for

individual securities SENSEX have been collected for all these ten years and seasonal variations

of stock returns have been analyzed individually for the both aforementioned periods and also

altogether from 1st April 2002 to 31st March 2012.

2.4 Tools for Analysis

The generated stock return data have been analyzed with the help of Dummy variable

regression analysis.

2.5 Limitations of the Study

The sample size and period of study are restricted based on the data available in the BSE

and NSE websites. Hence, the present study covers only 22 NSE&BSE listed companies and the

data have also been collected for 10 years alone. The study focuses on only two indices viz.

SENSEX and NIFTY. The other indices have not been paid attention in this study. The seasonal

variations of stock returns encompass the day effect and weekly effect alone. The stock prices

during other exclusive fiscal seasons like quarter of the years, pre and post-budgets,

implementation of policies by past and present governments, etc. have not been considered to

analyse the stock returns of the select companies. As this present study merely takes the

consistent share prices of the sample stocks into account for analysis, the results might not be

applicable to less active or not active traded stocks.

3. RESULTS

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3.1 Day-of-the Week Effect in Stock Returns

This topic is devoted to testing the anomalous effect on the analysis of stock returns. The

regularities that are not predicted by any asset pricing model are termed as „anomalies‟. In this

topic, day of the week effect are discussed. The existence of seasonality in stock returns,

however, violates an important the validity of called the Efficient Market Hypothesis (EMH).

The Efficient Market Hypothesis is a central paradigm in finance. New data constantly enter the

market place via economic reports, company announcements, political statements, and public

surveys. If the market is Informational efficient then security prices adjust rapidly and accurately

to new information.

3.1.1 Day of the Week Effect

The presence of Seasonality in stock returns violates the weak form of market efficiency

because equity prices are no longer random and can be predicted based on past pattern. This facilitates

market participants to devise trading strategy which could fetch abnormal profits on the basis of past

pattern. For instance, if there is an evidence of day of the week effect‟, investors may devise a trading

strategy of selling securities on Fridays and buying on Mondays in order to make excess profits.

Gibbons and Hess (1981) method pointed out that mean stock returns were unusually high on Fridays

and low on Mondays.

The numerous studies in USA and other countries documented and offered various

conjectures to explain weekend effect. The US stock market has a tendency to end each week on

a strong note by having highest returns on Friday and lowest (negative) returns on Monday.

However, studies in USA and other developed countries reject consistent daily return hypothesis.

In addition even fewer studies in India have confirmed anomalies in stock returns behaviour. A

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stock return anomaly implies that returns are not uniformly distributed across the days of a week.

Hence, an attempt is made here to test whether or not Indian stock market shows anomalies

pattern.

3.2 Day of the Week Effect by Using Dummy Variables

Regression on dummy variable is used to test whether the anomalies pattern in returns are

uniform across all days of the week. Gibbons and Hess method of regressing daily returns by

using five dummy variables for five days of the week (i.e., Monday through Friday) is used in this

study. The dummy variable regression equation is as follows:

Rt  1 M t   2Tt   3Wt   4Tht   5 Ft   t …………………. (1)

Where,

Rt = return on index at time t,

Mt, Tt,………Ft = dummy variable for Monday through Friday,

 1through 5 = regression parameters for mean daily returns and

 t = error term.

3.2.1 Day of Week Effect - Period I

The following table-1 presents the results of dummy variable regression to test

seasonality from April 2002 to March 2007.

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Table - 1: Dummy Variable Regression Analysis for Day of the Week Effect - Period I (April 2002 to March 2007)
Monday Tuesday Wednesday Thursday Friday
R-
S.No Company Co- Co- Co- Co- Co-
t-value t-value t-value t-value t-value Square
efficient efficient efficient efficient efficient
1 BHEL 0.0563 2.5635 0.0846 0.7564 0.3476 2.8262 0.2543 1.8134 0.3341 0.3276 0.003
2 CIPLA -0.2378 2.0867 0.0217 0.1986 0.1257 1.0654 0.0254 0.2543 0.2625 -1.9987 0.001
3 GAIL -0.0234 1.1563 0.0426 0.2583 0.2497 1.6874 0.2986 2.1987 0.1587 -0.1462 0.002
4 HDFC 0.1424 1.2863 0.1765 1.8510 0.0652 0.5426 0.2186 2.1864 0.1324 1.4065 0.006
5 HDFCBANK 0.0456 0.9856 0.0628 0.6482 0.1946 1.8652 0.0746 0.7628 0.0908 0.4528 0.005
6 HERO 0.0628 2.1873 0.0648 0.5684 0.0468 0.3906 0.1684 1.3628 0.2987 0.6042 0.006
7 HINDALCO -0.1486 2.8524 0.0920 0.1886 0.8682 0.0445 -0.4367 -0.0458 0.2915 -1.3068 0.009
8 HUL 0.0352 -0.0254 -0.1468 -1.4867 0.1628 1.7688 0.0527 0.6582 -0.0107 0.4369 0.005
9 ICICIBANK 0.0102 0.7062 -0.1254 -0.8962 0.2586 1.4589 0.1491 0.9858 0.1054 0.6882 0.003
10 INFY 0.6009 -0.2361 0.0769 1.8620 0.0059 0.2614 0.3016 0.3241 -0.0354 0.1694 0.000
11 ITC 0.1684 1.0692 -0.0568 -0.0436 0.0368 0.2425 0.2873 2.1682 0.1067 1.6582 0.008
12 L&T 0.1436 2.5326 -0.1684 -1.2683 0.1008 0.7968 0.2256 1.7542 0.3642 1.1262 0.009
13 M&M -0.1243 2.8542 -0.0682 -0.5426 0.2682 1.8963 0.1341 1.0151 0.3458 -0.9143 0.002
14 ONGC -0.0362 2.2651 -0.0168 -0.1462 0.4368 2.3684 0.3199 2.4528 0.2854 -0.2583 0.010
15 RIL 0.0636 1.8032 0.0218 0.5497 0.0927 0.6193 0.0561 1.4482 0.2134 0.8662 0.002
16 SBIN 0.0568 0.9682 -0.0998 -0.9514 0.4126 2.9876 0.3156 2.0864 0.1045 0.5086 0.010
17 STER 0.0341 3.6159 0.0115 0.2319 0.0462 0.9276 0.0308 0.5832 0.4235 0.6786 0.012
18 SUNPHARMA 0.0432 2.8121 0.0256 0.1987 0.1862 1.4890 0.1167 0.9638 0.3675 0.0189 0.008
19 TATAMOTORS 0.0152 2.4608 0.0134 0.0369 0.2064 1.5681 0.2168 1.6941 0.3254 0.1542 0.007
20 TATAPOWER 0.0814 4.2587 -0.1452 -1.1732 0.1426 0.9989 0.1964 1.3862 0.5634 0.7306 0.009
21 TATASTEEL 0.1372 3.5614 -0.0248 -0.2546 0.0876 0.6251 0.1468 1.1498 0.4178 1.1524 0.010
22 WIPRO -0.2542 -0.0541 0.0256 0.1442 0.2308 1.1325 0.0527 0.2358 -0.0065 -1.3041 0.003
Study Companies 0.0397 1.8959 -0.0060 0.0332 0.2533 1.2529 0.1457 1.2472 0.2336 0.2296 0.006
SENSEX 0.0945 1.2243 -0.0478 -0.5782 0.1468 1.8634 0.1528 1.7832 0.0153 0.4281 0.004
NIFTY 0.0456 0.6741 -0.0458 -0.6384 0.1582 2.3162 0.0758 1.1082 0.0524 0.7824 0.005
Source: Computed (Data from Bombay Stock Exchange and National Stock Exchange)

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From the above table-1, it is clearly observed that for first period study companies

Wednesday recorded highest return and Monday exhibits the lowest return during the study

period. Negative return is observed on Tuesday. So, it is advised that the investors should buy

the shares on Monday and sell these shares on Wednesday in the Bombay Stock Market. For the

two indices, Wednesday average return (0.1525 percent) exhibits the highest return and Friday

average return (0.0339 percent) exhibits the lowest return. Negative return is observed on

Tuesday shows negative return.

3.2.2 Day of Week Effect - Period II

The following table-2 presents the results of dummy variable regression to test

seasonality from April 2007 to March 2012. It is clearly observed that for second period study

companies Wednesday recorded highest return and Monday exhibits the lowest return during the

study period. No Negative return is observed on any day of week in second period. So, it is

advised that the investors should buy the shares on Monday and sell these shares on Wednesday

in the Bombay Stock Market. For the two indices, Thursday average return (0.2844 percent)

exhibits the highest return and Tuesday average return (0.0463 percent) exhibits the lowest

return. Negative return is observed on Tuesday and Wednesday shows negative return.

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Table - 2 : Dummy Variable Regression Analysis for Day of the Week Effect - Period II (April 2007 to March 2012)
Monday Tuesday Wednesday Thursday Friday
R-
S.No Company Co- Co- Co- Co- Co-
t-value t-value t-value t-value t-value Square
efficient efficient efficient efficient efficient
1 BHEL -0.1689 1.5442 0.0508 -0.9203 0.2338 0.5426 0.9858 0.0102 0.0652 1.1647 0.004
2 CIPLA -0.0528 1.7701 0.0369 -0.3258 0.2846 1.8652 0.3241 0.6009 0.1946 0.8666 0.008
3 GAIL -0.0703 0.8014 0.0362 -0.5146 0.1056 0.3906 2.1682 0.1684 0.0468 0.8664 0.001
4 HDFC -0.0106 -0.0296 -0.0113 -0.3514 -0.0032 -0.4368 0.0814 2.2381 -0.0163 -0.2837 0.006
5 HDFCBANK -0.1579 1.3014 0.1372 -1.3842 0.4423 -0.1462 0.0308 0.5832 -0.0168 1.1524 0.002
6 HERO 0.0302 1.8713 -0.0236 0.6231 0.3072 0.6725 0.0506 0.9524 0.0343 -0.4764 0.004
7 HINDALCO 0.1240 2.2004 -0.0107 0.6884 0.0217 0.0462 -0.1468 -1.4867 0.2319 -0.0254 0.007
8 HUL -0.0524 1.0396 0.1054 -1.7658 0.2258 0.1862 0.6534 1.5326 0.1987 0.7062 0.003
9 ICICIBANK 0.0358 -0.0146 0.0229 1.2472 -0.0017 -0.0566 -0.0257 -0.6639 -0.0022 0.5916 0.002
10 INFY 0.0228 1.4762 0.2682 0.9774 0.2184 1.1524 0.0180 0.5965 0.1372 1.8963 0.006
11 ITC 0.0246 1.6236 0.4368 0.0842 0.2624 -0.5426 0.0241 0.7498 -0.0682 2.3684 0.002
12 L&T -0.1545 1.5982 0.0927 -0.1672 0.3042 -0.1462 -0.0656 -1.8109 -0.0168 0.6193 0.005
13 M&M 0.1208 1.2426 0.8231 1.9991 0.4567 1.8032 0.2064 1.5681 0.2134 2.0542 0.002
14 ONGC -0.0141 -0.7852 0.0838 -0.3812 -0.0692 -0.7467 0.0042 0.0882 -0.0361 1.5963 0.001
15 RIL -0.1041 2.1894 0.0176 -0.4992 0.1097 0.2306 0.0272 0.6265 0.0107 0.4021 0.003
16 SBIN 0.3304 1.4768 0.0159 0.2184 0.1577 1.2355 0.0003 0.0082 0.0525 0.3413 0.003
17 STER 0.0624 0.8446 -0.0165 0.1413 0.2865 1.1105 0.1279 2.5195 0.0471 -0.3685 0.004
18 SUNPHARMA 0.0312 1.0349 -0.0394 0.1826 0.3658 0.8596 -0.0659 -1.5067 0.0349 -0.9636 0.008
19 TATAMOTORS -0.0801 1.5024 0.0191 -0.8136 0.2666 0.6926 0.0107 0.2306 0.0273 0.3759 0.003
20 TATAPOWER 0.0168 1.4498 0.0104 0.9781 0.1598 0.8762 0.0313 0.7534 0.1244 0.2167 0.005
21 TATASTEEL -0.0907 0.2482 0.0224 -0.5362 0.1387 0.9989 0.0381 0.9918 0.1426 0.5231 0.002
22 WIPRO 0.2628 2.1842 0.0589 0.4176 0.2184 0.6251 0.0362 0.9777 0.0876 1.3332 0.002
Study
0.0048 1.2077 0.0971 0.0390 0.2052 0.5097 0.2042 0.4422 0.0679 0.6799 0.004
Companies
SENSEX 0.1835 1.6253 -0.0563 -0.5246 -0.0502 0.4268 0.0692 0.6138 0.3005 2.664 0.006
NIFTY 0.1950 2.0732 -0.0136 -0.1458 -0.0056 -0.0582 0.0235 0.2502 0.2684 2.8562 0.008
Source: Computed (Data from Bombay Stock Exchange and National Stock Exchange)

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3.2.3 Day of Week Effect – Entire Period

The following table-3 presents the results of dummy variable regression to test

seasonality from April 2002 to March 2012. It is clearly observed that for entire period study

companies Wednesday recorded highest return and Monday exhibits the lowest return during the

study period. No Negative return is observed. So, it is advised that the investors should buy the

shares on Monday and sell these shares on Wednesday in the Bombay Stock Market. For the two

indices, Thursday (0.084 percent) and average return (0.025 percent) exhibits the highest return

and Tuesday (0.001 percent) and average return (0.025 percent) exhibits the lowest return.

Negative return is observed on Monday and Wednesday shows negative return.

Amanulla and Thiripalraju (2001) found that there were consistent positive returns on

Wednesdays and negative returns on Tuesdays due to possible impact of the Week End Effect.

Hence, the hypothesis that “There is no significant difference in stock return across days of the

week” is rejected. So there was strong significant positive relationship between Monday through

Friday. The results indicated that the Day of the Week Effect exists in the Indian Stock Market

during the study period.

The dummy variable regression analysis of stock returns for the study companies and the

seven indices shows significant variation across all days of the week.

This anomaly seems to be an evidence for the existence of market dependence. This return

pattern gives an idea for an investment strategy. By following this strategy one can beat the

market and investors could increase the expected return. This will increase the profit or minimize

loss for an investor.

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Table - 3: Dummy Variable Regression Analysis for Day of the Week Effect – Entire Period (April 2002 to March 2012)
Monday Tuesday Wednesday Thursday Friday
R-
S.No Company Co- Co- Co- Co- Co-
t-value t-value t-value t-value t-value Square
efficient efficient efficient efficient efficient
1 BHEL 0.0282 0.3961 0.0140 0.7427 0.0408 0.3036 -0.0151 -0.3214 0.0655 1.5788 0.006
2 CIPLA 0.0026 2.0521 0.0170 0.0679 0.2704 0.3703 0.0365 0.8293 -0.0371 -0.7791 0.003
3 GAIL -0.0371 2.0251 0.0269 -0.9892 0.2589 0.5751 0.0316 0.6966 -0.0036 -0.0857 0.007
4 HDFC 0.0247 3.8379 -0.0051 0.5973 0.6201 -0.1081 -0.0423 -0.9146 0.0176 0.4021 0.002
5 HDFCBANK -0.0845 1.0092 0.0791 -2.1946 0.1191 1.8262 0.0089 0.2144 0.0159 0.3413 0.007
6 HERO 0.0095 -0.2448 0.0272 0.2555 -0.0324 0.6265 0.0852 1.8792 -0.0165 -0.3685 0.003
7 HINDALCO -0.0027 0.8853 0.0003 -0.0772 0.0759 0.0082 -0.0149 -0.3485 -0.0394 -0.9636 0.002
8 HUL 0.0928 -0.1002 0.1279 1.6921 -0.0045 2.5195 -0.0245 -0.4607 0.0191 0.3759 0.001
9 ICICIBANK -0.0214 2.0974 -0.0659 -0.5014 0.2815 -1.5067 -0.0107 -0.2395 0.0104 0.2167 0.006
10 INFY 0.0082 -0.9592 0.0107 0.1949 -0.1254 0.2306 0.0458 0.9265 0.0300 0.5825 0.008
11 ITC -0.0438 3.8206 0.0525 -1.1265 0.7482 1.2355 -0.0561 -1.4149 -0.0242 -0.5529 0.003
12 L&T 0.0120 1.0512 0.0471 0.3824 0.0741 1.1105 -0.0646 -1.5866 0.0508 1.1647 0.006
13 M&M -0.0086 1.6864 0.0349 -0.2757 0.1230 0.8596 -0.073 -1.8534 0.0369 0.8666 0.002
14 ONGC 0.0180 1.5444 0.0273 0.5965 0.1071 0.6926 -0.0561 -1.4482 0.0362 0.8664 0.005
15 RIL 0.0241 -0.3062 -0.0136 0.7498 -0.0359 -0.3842 0.0005 0.0146 0.0248 0.6612 0.003
16 SBIN -0.0656 1.6444 0.0136 -1.8109 0.1473 0.3155 0.0363 0.9131 -0.0475 -1.1522 0.003
17 STER 0.0471 1.2874 0.0339 1.2701 0.2272 0.7907 0.0313 0.7534 0.0242 0.5737 0.009
18 SUNPHARMA 0.0054 1.1339 0.0475 0.1654 0.1843 1.2375 0.0381 0.9918 -0.0047 -0.1138 0.002
19 TATAMOTORS -0.0216 1.3995 -0.0078 -0.6036 0.1461 -0.1925 0.0362 0.9777 -0.0607 -1.5571 0.011
20 TATAPOWER 0.0472 0.4034 0.0503 1.2037 0.0575 1.1475 -0.0475 -1.0926 0.0224 0.5231 0.009
21 TATASTEEL 0.0210 -0.5779 0.0051 0.6384 -0.0824 0.1251 0.0589 1.4835 0.0589 1.3332 0.007
22 WIPRO 0.0261 -0.5778 -0.0554 0.8392 -0.0622 -1.5631 -0.0051 -0.1443 -0.0528 -1.3479 0.008
Study Companies 0.0037 1.0686 0.0213 0.0826 0.1427 0.4645 0.0000 -0.0066 0.0057 0.1166 0.005
SENSEX -0.0389 1.1064 0.0210 -1.1291 -0.0489 -1.2552 0.0186 0.4557 0.0003 0.0082 0.006
NIFTY -0.0188 2.7275 0.0261 -0.6315 0.0009 0.0268 0.0197 -0.5554 0.0135 -0.3405 0.007
Source: Computed (Data from Bombay Stock Exchange and National Stock Exchange)

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Alochana Chakra Journal ISSN NO:2231-3990

4. DISCUSSION

Day-of-the Week Effect in Stock Returns

For the purpose of testing day of the week effect, regression on dummy variable was

used. There is an existence of day of the week effect in the Indian stock market. It is clearly

observed that for first sub-period study companies Wednesday recorded highest return and

Monday exhibits the lowest return during the study period. Negative return is observed on

Tuesday. For the two indices, Wednesday exhibits the highest return and Friday exhibits the

lowest return. Negative return is observed on Tuesday shows negative return. And also same

result in it is clearly observed that for second sub-period study companies Wednesday

recorded highest return and Monday exhibits the lowest return during the study period. But

there is no Negative return is observed on any day of week in second period. But for the ton

indices, Thursday exhibits the highest return and Tuesday exhibits the lowest return. Negative

return is observed on Tuesday and Wednesday shows negative return. It is clearly observed

that for entire period study companies Wednesday recorded highest return and Monday

exhibits the lowest return during the study period. Here also no Negative return is observed.

For the two indices, Thursday exhibits the highest return and Tuesday exhibits the lowest

return. Negative return is observed on Monday and Wednesday shows negative return.

Hence, the hypothesis that the all sub-periods “There is no significant difference in stock

return across days of the week” is rejected. So there was strong significant positive relationship

between Mondays through Friday. The dummy variable regression analysis of returns for all the

22 companies and the two indices show evidence for significant variation across all days of the

week that the all sub-periods.

5. CONCLUSION

Based on the above findings, it is concluded that the dummy variable regression

analysis of returns for that the all sub-periods all the companies and the two indices shows

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Alochana Chakra Journal ISSN NO:2231-3990

evidence for significant variation across all days of the week. Hence, it is inferred that the all

sub-periods daily stock returns show market dependency. This return pattern gives an idea for

an investment strategy. By using this result one can do an appropriate investment strategy to

increase the expected returns. This will enhance the profit or minimize the loss for investors.

REFERENCES

[1] Amanulla S. and Thiripalraiu M. (2001), “Week End Effect: New Evidence from the
Indian Stock Market”, Vikalpa, 26(2), pp. 33-50.

[2] Balasubramani K. (1994), “Behaviour of Stock Return in India”, Doctoral Dissertation,

Bharathiar University, India.

[3] Cross .F (1973), “The Behaviour of Stock Prices on Friday and Monday”, Financial
Analysis Journal, pp. 67-69.

[4] Dona1d. E. and Fisher Rona1d. J. Jordan, Security Analysis and Portfolio Management,
Prentice Hall of India (Pvt.) Ltd. New Delhi 110001, 1994.

[5] Gibbons and Hess (1981), “Day of the Week Effect and Asset Return”, Journal of
Business, 54(4), pp.579-596

[6] Gosh.T.P., "Value at Risk", Express Investment, weekly Vo1.8, No. 49, November 30 to
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[7] Herbst, A., McCormack, J. P. and West, E.N. (1987), “Investigation of a Lead-Lag
Relationship between Spot Stock Indices and Their Futures Contracts”, Journal of Futures
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[8] Indu Salian, "Risk Management of Financial sector", The Express Investment, weekly,
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[9] Min JH, Najand M (1999), “A Further Investigation of the Lead-Lag Relationship
between the Spot Market and Stock Index Futures: Early Evidence from Korea”, Journal of
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[10] Rajagopala Nair and Elsamma Joseph, "Risk Management in Corporate Securities", The
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[11] Sunil Bamodar, An Introduction to Derivatives and Risk Management in Financial

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