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Introduction
Seasonalities or calendar anomalies are well documented and are perhaps the best-known
examples of inefficiencies in the financial markets. It may be in terms of seasonal effects over
the day-of-the-week, the months of the year, or over specific years. Evidence of such
seasonalities is readily available for the well-established stock markets in the developed
economies, as well as in some emerging market countries. While the studies of Keim (1983),
Jaffe et al. (1985), and Ariel (1987) revealed the existence of a monthly effect on the US and
other developed markets, studies by Rozeff and Kiney (1976), Gulketin and Gulketin (1983),
Keim (1983), and Reinganum (1983) revealed the existence of a January effect, where returns
in January tend to be larger than returns in other months.
The main argument proposed is the tax-loss selling hypothesis where investors sell in
December and buy back in January such that returns are higher at the beginning of the year.
Essentially, the tax-loss hypothesis is supported in most countries where the tax year ends in
December. For instance, the months of year effect would exist if returns on a particular
month are higher than that in other months. This negates the notion of efficiency in markets
since traders are able to earn abnormal returns by examining the pattern of monthly returns
and framing trading strategies accordingly. Essentially, this entails an inefficient market
situation where returns are not proportionate with risk.
The purpose of this study is to investigate the existence of a day-of-the-week effect
(weekend effect), financial year effect (April effect) in the NSE indices and frame the trading
strategy.
Literature Review
A number of studies have been carried out to examine the stock market seasonality.
Seasonalities or calendar anomalies are different share market returns at distinct cusps in
* Senior Lecturer, Department of Management Studies, Kalasalingam University, Krishnan
Koil 626190, India. She is the corresponding author. E-mail: selvarani05@yahoo.co.in
* * Lecturer, Department of Management Studies, Francis Xavier Engineering College, Tirunelveli, India.
E-mail: jleenajenefa@yahoo.com