The Day-of-the-Week Effect in the Indian Stock Market Revisited

Abstract

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This article investigates one of the most widely researched calendar anomalies, the day-of-the-week (DOW) effect, under which expected returns of financial assets are not identical on all days of the week, in the Indian stock market, represented by the Bombay Stock Exchange’s (BSE) index—Sensex from 2000 to 2019. We find that Sensex returns do not exhibit the DOW effect during our 20-year study period. Further, we investigate if this calendar anomaly was present during the global financial crisis of 2008–2009 and post this crisis period, and find that the DOW effect does not exist in either period. In order to take into consideration the presence of outliers due to the crisis period being included in the study period, we winsorize our data at one percent, and still discover no support for the DOW effect. Finally, we show that the DOW effect does not exist in other sectoral indices of the BSE. Though our result suggests that the Indian market is efficient, we suggest testing for other calendar anomalies like the turn of the month, turn of the year, holiday effect, Monday effect, etc. before concluding that the Indian stock market is efficient.

Keywords: Day of the Week, Calendar Anomaly, India, Financial Crisis

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