Journal of Commerce and Accounting Research

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Individual Investor Trading Activity and Day-Of-The-Week Anomaly – Indian Evidence


Affiliations
1 Assistant Professor, ICFAI Business School, IFHE-Hyderabad, Telangana, India
2 Professor, Institute of Public Enterprise, Hyderabad, Telangana, India
     

   Subscribe/Renew Journal


This paper examines the day-of-the-week anomaly in the Indian stock market. Accaording to efficient market hypothesis, the average returns should be constant all days of the week. The return generation process theory proposes that when calendar time proposition is considered, the return on Monday should be three times that of Friday. On the other hand, when trading time proposition is considered, the returns on all days of the week should be similar. However, prior research on day-of-the-week anomaly provides substantial evidence that the returns on Monday are negative. To empirically test the return generating process theories from the perspective of individual investors in the Indian stock market, we obtain daily buy and sell turnover of individual investors for a period of 16 years. Using the models suggested by French (1980), we test this hypothesis. We perform empirical tests for the full sample period and four sub-sample periods. Our results indicate significant average negative returns on Monday. The sell turnover on Monday is less than the sell turnover on Friday. At the same time, the buy turnover is also negative on Monday. It appears that individual investors stay away and are not much active in the stock markets on Mondays. Moreover, the supply and demand for stocks from individual investors appear to be lower on Mondays. One of the reasons for this may be the individual investors’ dependence on broker calls to buy or sell securities in the Indian stock market. We also observe that individual investors take active participation on Tuesdays and Wednesdays, when they receive calls from brokers.

Keywords

Efficient Market Hypothesis, Stock Market Anomaly, Day-Of-The-Week Effect, Monday Effect, Individual Investors.
Subscription Login to verify subscription
User
Notifications
Font Size


  • Abraham, A., & Ikenberry, D. L. (1994). The individual investor and the weekend effect. Journal of Financial and Quantitative Analysis, 29(2), 263-277.

  • Brooks, R. M., & Kim, H. (1997). The individual investor and the weekend effect: A reexamination with intraday data. The Quarterly Review of Economics and Finance, 37(3), 725-737.

  • Chan, S. H., Leung, W. K., & Wang, K. (2004). The impact of institutional investors on the Monday seasonal. The Journal of Business, 77(4), 967-986.

  • Desai, J. M., & Joshi, N. A. (2021). Volatility analysis and volatility spillover across equity markets between India and selected global indices. Journal of Commerce & Accounting Research, 10(4), 95-103.

  • Dhankar, R. S., & Chakravarty, M. (2006). Are there calendar anomalies in the bourses of South Asia? Finance India, 20(3), 883-893.

  • Dyl, E. A., & Maberly, E. D. (1988). A possible explanation of the weekend effect. Financial Analysts Journal, 44(3), 83-84.

  • French, K. R. (1980). Stock returns and the weekend effect. Journal of Financial Economics, 8(1), 55-69. 8. Gbeda, J. M., & Peprah, J. A. (2018). Day of the week effect and stock market volatility in Ghana and Nairobi stock exchanges. Journal of Economics and Finance, 42(4), 727-745.

  • Gkillas, K., Vortelinos, D. I., Babalos, V., & Wohar, M. E. (2021). Day-of-the-week effect and spread determinants: Some international evidence from equity markets. International Review of Economics & Finance, 71, 268-288.

  • Goud, M. M. (2022). A study on the saving and investment behaviour of individual investors. Journal of Commerce & Accounting Research, 11(1), 23-30.

  • Hirsch, Y. (1986). Don’t sell stocks on Monday. Penguin Books.

  • Jaffe, J., & Westerfield, R. (1985). Patterns in Japanese common stock returns: Day of the week and turn of the year effects. Journal of Financial and Quantitative Analysis, 20(2), 261-272.

  • Kamaly, A., & Tooma, E. A. (2009). Calendar anomalies and stock market volatility in selected Arab stock exchanges. Applied Financial Economics, 19(11), 881-892.

  • Lakonishok, J., & Maberly, E. (1990). The weekend effect: Trading patterns of individual and institutional investors. The Journal of Finance, 45(1), 231-243.

  • Lauterbach, B., & Ungar, M. (1992). Calendar anomalies: Some perspectives from the behaviour of the Israeli stock market. Applied Financial Economics, 2(1), 57-60.

  • Miller, E. M. (1988). Why a weekend effect? Journal of Portfolio Management, 14(4), 43-48.

  • Onyuma, S. O. (2009). Day-of-the-week and month-of-the year effect on the Kenyan stock market returns. Eastern Africa Social Science Research Review, 25(2), 53-74.

  • Pearce, D. K. (1996). The robustness of calendar anomalies in daily stock returns. Journal of Economics and Finance, 20(3), 69-80.

  • Rajkumar, G. (2015). Linkages between India and three ASEAN stock markets: A co-integration approach. Journal of Commerce & Accounting Research, 4(1), 37-45.

  • Rystrom, D. S., & Benson, E. D. (1989). Investor psychology and the day-of-the-week effect. Financial Analysts Journal, 45(5), 75-78.

  • Stephens, J., Mehdian, S., & Bush, P. J. (2020). An analysis of investors’ reaction to intraday unexpected price movements in major US equity market. Journal of Applied Financial Research, 1, 27-38.


Abstract Views: 359

PDF Views: 0




  • Individual Investor Trading Activity and Day-Of-The-Week Anomaly – Indian Evidence

Abstract Views: 359  |  PDF Views: 0

Authors

Sager Reddy Adavelli
Assistant Professor, ICFAI Business School, IFHE-Hyderabad, Telangana, India
Rama Krishna Yelamanchili
Professor, Institute of Public Enterprise, Hyderabad, Telangana, India

Abstract


This paper examines the day-of-the-week anomaly in the Indian stock market. Accaording to efficient market hypothesis, the average returns should be constant all days of the week. The return generation process theory proposes that when calendar time proposition is considered, the return on Monday should be three times that of Friday. On the other hand, when trading time proposition is considered, the returns on all days of the week should be similar. However, prior research on day-of-the-week anomaly provides substantial evidence that the returns on Monday are negative. To empirically test the return generating process theories from the perspective of individual investors in the Indian stock market, we obtain daily buy and sell turnover of individual investors for a period of 16 years. Using the models suggested by French (1980), we test this hypothesis. We perform empirical tests for the full sample period and four sub-sample periods. Our results indicate significant average negative returns on Monday. The sell turnover on Monday is less than the sell turnover on Friday. At the same time, the buy turnover is also negative on Monday. It appears that individual investors stay away and are not much active in the stock markets on Mondays. Moreover, the supply and demand for stocks from individual investors appear to be lower on Mondays. One of the reasons for this may be the individual investors’ dependence on broker calls to buy or sell securities in the Indian stock market. We also observe that individual investors take active participation on Tuesdays and Wednesdays, when they receive calls from brokers.

Keywords


Efficient Market Hypothesis, Stock Market Anomaly, Day-Of-The-Week Effect, Monday Effect, Individual Investors.

References