An Empirical Investigation of Day of the Week Effect in Stock Return: Evidence from CNX Nifty

Purpose of the Study: Indian markets have shown prompt response to the financial crisis in the year 2008 and the results affected the stock returns critically. An earnest attempt is made in this study to know the existence of weak form of efficiency in Indian market. Increased trade volumes in CNX Nifty have gained leading position within world indices. Therefore, it is essential that supplementary researches should be made for better understanding of efficiency in Indian market.

Methodology Adopted: During the crisis, each index is likely to lose its efficiency. The efficiency in the stock market returns of India has been estimated using two parametric and two non-parametric tests. The daily data sample employed is from 01 April 2007 through 31 March 2012. The model used in this study will test the hypothesis of equal mean returns for each trading day of the week. This is the most common anomaly found in the stock market, which promotes investors to achieve abnormal gain in the market.

Findings of the Study: It has been found that the crisis period (2007- 2012) had no impact on the returns of Indian market. In addition, it is interesting to see that the tests applied to know the randomness of the return is supporting the weak form of efficiency in the market. The results reveal that Indian stock market (CNX Nifty) is following weak form of efficiency.

Research Limitations: As far as limitations of the study are concerned, the research has been done by taking into account the Indian perspective only. Therefore, a major limitation is that it will not be applicable to other stock exchanges due to the cultural differences and trading background. Another limitation is that this study has brought together the data of market Index and individual scrips are not considered in it. This study is basically aiming at testing the efficiency of the CNX Nifty and creating an investment strategy through these findings which may not provide accurate results to marketers.