Impact of the monthly, day of the week and trading month effects on Bombay Stock Exchange Indices Returns for the period 2000-2014

Abstract

The paper investigates monthly, day of the week impact and trading month effect on Indian stock market, i.e. the Bombay Stock Exchange. The study is based on daily data across 19 indices of the Bombay Stock Exchange so that the effects can be judged for the entire market and across sectors. The analysis is carried out for the entire period. The period is again divided into pre and post subprime crisis and the analysis is repeated. The subprime crisis period in this study is taken to be 1st Jan 2008 to 31st Dec 2009. In this study, first an OLS is carried out followed by an ARCH model as the residual analysis shows an ARCH effect. The closing prices of daily data are used to calculate returns of the indices. The BSE Sensex, BSE 100, BSE 200, BSE 500, BSE Capital Goods BSE Consumer durables, BSE FMCG, BSE Health Care, BSEIT, BSE PSU, BSE Tech, BSE Metal, BSE Oil Gas are studied for the period 1st March 2000 to 28th October 2014. The other indices BSE Auto, BSE Bankex, BSE Midcap, BSE Small Cap and BSE Realty are studied from their inception till 28th Oct 2014. In the monthly effect it is seen that September and December appears to be months which have higher daily returns in the post subprime crisis period while November and December are the two months that have shown higher returns in pre subprime crisis period. If the overall data is taken into account, the month of December displays higher daily return. Similarly, Wednesday displays higher return in comparison to other days in the pre subprime crisis period and the overall data. But in the post subprime crisis period Monday displays higher returns in comparison to the other days of the week. It is also observed that returns are normally higher in the first fortnight of the month.