An evidence of calendar effects on the stock market of Pakistan: a case study of (KSE-100 index)

Khurram Shehzad1*, Nadeem Sohail1

1
University Community College, Government College University, Faisalabad
ART I C LE I N FO AB ST R ACT

*Corresponding Author:
jamezband007@gmail.com
DOI:
10.24081/nijesr.2018.1.0006
Keywords:
Calendar effect, Karachi stock
exchange, January effect. Jell
Classification: G14, G15
This is the study that investigates the Daily impact, weekly impact, and Monthly impact by
excluding the holidays for most updated time period through February 1991 to MAY 2015.
Study used the dummy variables to explore the independent variables and used stock return
as dependent variable. Ordinary least square and descriptive statistics technique is used to
examine the data. Middle day effect was proven in the equity market of Pakistan, study also
showed first week of the month has more return as compare to any other week in a month.
Whereas month wise results showed that month of May had negative return.

Karachi stock trade was been welcomed as one of the best

I. INTRODUCTION
These days, calendar impacts are capturing a great interest
of researchers and investors, because of confirmation of
excess return connected with a specific day, month or week in
the most famous worldwide stock markets [1]. Calendar
effects are the specific stock values that are connected with
calendar. There is significance importance of the day wise,
week wise and month wise effects in the stock return anomaly.
According to the efficient market theory, it is difficult to
predict the accurate stock prices in an open market [1].It is
considered that financial investors are rational and prices of
stocks are measured by the rule of supply and demand of a
specific stock [2]. If an investor is going to predict the future
stock price for a specific security, it will be considered that
stock price prevailing today is managed with float term. In
other words, we can say that there is no existence of patterns
in stock price. On the other hand, if there is a regular or
calendar impact prevailing in the market, it will permit the
financial investors to get a strange benefits [3]. This nullifies
the appearance of financial sector effectiveness that describes
prices of stocks are independent from the previous prices.
There are some authors who investigate the Day wise,
Week wise and Month wise effect of the stock anomalies. But
no one includes all these effects at the same time. Some
authors also investigate the Ramadan impact.
There are many studies on the seasonal impacts of the
stock return but there is huge confliction between their results.
As the Pakistan is an under develop nation so examination of
stock return in this region can establish knowledgeable
conclusion. In this study author wants to discover true results
about daily, weekly and monthly effects prevailed in the stock
market of Pakistan. For this purpose author has utilized the day
to day, week by week and month to month stock return
gathered from the figures given in Karachi stock exchange 100
index. Accepting Pakistan a developing market, the formal
wish would be that the business sector is uneconomical.
46
performing developing markets in the middle of 1990 [1].
Before 1990, the KSE couldn't assume its urgent part in
monetary improvement. The stock exchange was limited and
not be able to provide the capital needs of the economy for a
long time [1]. Financial institutions and business banks fulfil
the capital needs for the long term period Stocks was no more
a 'side illustrate' a pursuing ground for the rich where fortunes
were made or lost [1]. Due to these reasons the gainful
working of stock trade was a noteworthy question mark
because The KSE had been portrayed as a speculative
business. By the Government side there was no
implementation of rules and regulations and the investors
were not ready to invest their resources in KSE without
having any support by government [1].
Besides, limitation on outpouring and inflow of remote
exchange liquidity imperatives, restricted exchanging base
and constrained utilization of technology were obliged to build
up the business. In the same way as other developing markets
KSE is viewed as a narrow market, assumes a restricted part
for increasing funds and is a decently unpredictable
marketplace [3]. The business sector has encountered the
blasts and busts of nearly brief time term, which may be
because of poor data, powerless institutional backings and
absence of consistence with managing power prerequisites.
Accordingly data played a restricted part in stock exchange.
These measures have killed the possibilities of imitation
cheats and defer in exchange, and subsequently have brought
on decay in the instability of stock costs. Notwithstanding that,
the trade gives data on continuous premise to financial
specialists through the Internet. The Security and Exchange
Commission of Pakistan (SECP) gives rules to fortify great
corporate administration, with the point of upgrading
speculator certainty by expanding straightforwardness in the
business practices of recorded organizations [3]. With a
specific end goal to minimize the hierarchical shortcoming and
to progress the money related soundness the legislature has
privatized the monetary what's more, non-budgetary
organization. They created the stores from stock exchanges
that at last enhanced the execution of stock exchange. Further,
they moreover aided in connecting data about the regularly
changing political and financial environment, and helped
speculators to relate all such data to the exchanging action of
the business in a productive way; this has minimized the
chances for speculators winning above ordinary benefit [3].
As talked about in the writing, value and exchanging
volume are the two most essential variables in examination of
productive business speculation on the grounds that the
chartists watch both value and exchanging volume. Since
stock value design gives the signs, numerous professionals
accepted that the exchanging volume should ascend to fortify
the pattern. Such support demonstrates purchasers' or
merchants' advantage, and this investment may be identified
with a change in basics.
Various studies have been directed with respect to the
connection between trading volume and stock return. A large
portion of these studies discovered the observational
relationship between exchanging volume and comes back to
be direct and nonlinear [4].
In Karachi stock exchange data is accessible on an ongoing
premise with exchanging volume and it controls the arrival.
That is the reason it is exciting to examine the relationship in
the middle of danger and come back with data in Karachi stock
exchange. It is normal that, in the KSE, return is emphatically
identified with both hazard and exchanging volume [4].
The presence of calendar seasonality impacts disproves the
EMH (efficient market hypothesis), which expresses that
business sectors are educationally effective, and in this way
unusual returns are unachievable [2], [3], [4]. The presence of
calendar impacts has taken everyone's attention because of
businessmen looking for gainful exchanging systems trying to
exploit any unique anomaly. Numerous studies have
researched the January impact in the US Rozeff and Kinney
[3] [4], Mehdian and Perry [4], Keim [5], Rogalski and Tinic
[6], and outside the US Berges, et al. [7], Robins, et al.
[8],Auret and Cline [9]. The day-of-the-week impact has
gotten investigation in numerous US and UK studies Doyle
and Chen [10], Steeley [11], Gibbons and Hess [12], and also
other created and developing markets Basher and Sadorsky
[13], Jaffe and Westerfield [14]. Preholiday impact
incorporates various studies in created and creating markets
Bhana [15], Lakonishok and Smidt [16], Vergin and McGinnis
[17], Marrett and Worthington [18], Kim and Park [19],
Brockman and Michayluk [20].
A number of the literature cited focus on these seasonality
in each study Holden, et al. [21]. Now a days, studies are
including various calendar impacts like daily impact, weekly
impact and monthly impact, in one study to examine whether
over various years, stock exchange returns experience
different sorts of anomalies in their stock returns (see for
instance Chatterjee and Maniam [22], Ziemba [23], Holden, et
al. [21], Coutts and Sheikh [24], Studies done on various
schedule impacts in South Africa are to a great degree
47
restricted. Coutts and Sheik (2002) is the main known
distributed paper that tests for each of the three picked
calendar impacts at one time for South African stock
exchange. Ali and Akbar [25] investigate calendar impacts
with the use of daily, weekly and monthly data in one study
without including the holidays from November 1991 to
October 2006, for the Karachi stock exchange in Pakistan. But
it does not consider late changes in innovation, principles and
regulations and additionally monetary changes. Along these
lines, there is a need to re-examine these schedule impacts
utilizing a later example period. This study evaluates the
presence of the day-of-the-week impacts on the KSE by taking
data from 1991 to 2015.
These sorts of calendar abnormalities have had a large
number of articles committed to them, to such an extent, that
impressive inspiration is needed for the initiation of this study.
This study endeavours to fill a hole in writing in the
accompanying ways. Firstly, past writing has a tendency to
concentrate on every individual seasonality concerning
different markets over the world (see for instance Cadsby and
Ratner [26], Rozeff and Kinney [3]. Furthermore, most work
performed on calendar abnormalities has focused solely on
well developed markets. The couple of existing studies
concentrating on developing economies give minor
consideration to the initial markets of Pakistan see also
Alagidede [27]. Experimental examination of various calendar
inconsistencies in one study in Pakistan is constrained. This
study will take an amplified approach to deal KSE 100 index
with the aim of uncovering the presence of different calendar
seasonality for the one time period. This method is utilized by
Chien, et al. [28]. The methodology taken will take after the
recommendation by Chien, et al. [28], by researching the day-
of-the-week impacts, for the whole Karachi stock exchange
100 index. (Additionally see Ziemba [23], Chan, et al. [29].
Anomaly will be specifically investigated on mean returns
of stocks recorded for the KSE 100 index utilizing descriptive
statistics. Furthermore, this study will likewise utilize an OLS
variable relapse model. Utilizing two methods of analyzing
data will permit the straightforward correlation of results got
in this study with past writing. If we find calendar seasonality
under one methodology but no anomaly under second
methodology, one can reason that the presence of the
inconsistency is the immediate after effect of the
methodological approach used. Likewise, the benefit of
utilizing these techniques additionally describe that one
method do test seasonality as lower statistical moments
(standard deviation and mean) whereas other one measure
higher moments (skewness and kurtosis) that is very rare in
anomaly studies. Rowjee [30].
Main purpose of this research is to investigate the day
wise, week wise and month wise effect on stock return. Market
efficiency of Karachi stock exchange return could be tested
indirectly with these actions. For this purpose author has
decided to use the time series financial data registered on the
Karachi stock exchange 100 index, for the period of February
2, 1991 to May 24, 2015. This research has focused on the
query whether the starting days of the week has more return of
the ending days of the week. Study has generated the
following hypothesis to ascertain the true results.
HO: The stock return is positive on Monday.
H1: The stock return is negative on Monday.
HO: The stock return is positive on Tuesday.
H1: The stock return is negative on Tuesday.
HO: The stock return is positive on Wednesday.
H1: The stock return is negative on Wednesday.
HO: The stock return is positive on Thursday.
H1: The stock return is negative on Thursday.
H0: The stock return is positive on Friday.
H1: The stock return is negative on Friday.
II. LITERATURE REVIEW
Malkiel [31], in evidence of Fama [32], a market that
represent the fully and true evidence related to individual and
whole stock return in market is said to be an efficient market.
Fama [32] describe the three types of market efficiency
prevailing in all over the world. The type which comes at first
is called the weak form of market efficiency, it does not have
the ability to present all the information to predict upcoming
price. This behavior of EMH advance the situation to Random
walk theory that describe today’s prices are independent from
previous day prices. Basically RWT describe that today’s
price of a security does not depend on the yesterday’s price.
According to sense of investor, he cannot predict that
tomorrow what would be the price of a security? Hence prices
of securities are secretive at some extent. The second form of
market efficiency is called semi strong form of market
efficiency in which historical prices convey the full
information. In other words we can say that an investor can
predict future prices of at some extent [59]. As there is no
need to analyze the financial statement of a company to predict
future prices as they already reveal such information. The
strong form of efficiency reveal security price including
historical, public insider or private information [59].
If there is existence of EMH then an investor can’t beat the
market neither with the selection of a specific security nor with
selection of specific time [58]. Though both studies was
unable to explain the calendar seasonality. There is dispute
between RWT and EMH due to these anomalies because of
demonstrating the calendar seasonality. Coutts, et al. [33]. The
existence of these anomaly patterns according to time
challenge the market efficiency, because any anomaly should
dispel once it appear in efficient market. Chen, et al. [34].
An abnormal positive return on Friday and negative return
of Monday is normally called the day of the week impact.
Negative returns on Monday is because of bad news and
negative information during the weekend Lakonishok and
Maberly [35]. Monday’s return shows the return of investment
of three days that begins with the end of Friday to the end of
Monday. Mean and variance for these three days may be
higher as compared to other days. Though a reasonable and
48
generally accepted description of these days is not yet cleared.
If this pattern is reliable then an investor can avail these type
of information available to select not only the best amount of
investment but also the timing and portfolio of securities, i.e.
an investor can buy the securities on Monday because of less
price and sell it on Friday due to higher price on that day.
French [36] found that Monday had the negative return. Fama
[37] analyzed the different day’s variances and found the
variance on Monday was 20% greater as compared to other
day variance.
Gibbons and Hess [12] analyzed the S&P 500 index and
found great day of week impact based on similarly biased
portfolios taken from the CRSP. During the study from 1962
to 1978 the researcher found that mean return for Monday was
-33.5% for the index of S&P and negative 26.8% for similar
weighted portfolio. Even that while the study on other assets
like the T. Bills market study also discover the lessen return
for the Monday. With the elimination of the market efficiency
(using adjusted mean returns), stocks returns shows the
significant day impact. Dubois and Louvet [38] analyzed the
daily impact at various phases of development for the various
markets of nine states during the period of 1969 to 1992 by
using the ARIMA model. Study concluded that anomalies
exist for some of the European states but was not significant
for the United States. Study of Dubois and Louvet [38] and
Gibbons and Hess [12] is backward so these results should be
retested for the recent times as there might be possibility of
changes in results while testing by most recent stock returns.
Berument and Kiymaz [39] test the S&P index with the
help of OLS during the period of Jan. 1973 to 1997 October.
Study concluded that there was Monday and Wednesday
impact for the period of 1973 to 1987. While there was
continuous first three days seasonality pattern of the week
during the period of 1987 to 1997. These results were similar
to the results of Ajayi, et al. [40]. This study will strengthen
the study done by Berument and Kiymaz [39] with the use of
recent data and new methodology that would focus the higher
statistical moments. Chinzara and Slyper [41] observe the
South Africa by taking entirely share index to test the days of
week impact. Study used the data form 1995 January to
December 2010. Results of the study found that there was
significant and positive return on Monday while significant
negative impact for the day of Friday was also found. Study
also reveal that the results was not altered when study used the
risk factor.
Basher and Sadorsky [13] evaluated by employing the
unrestricted and restricted risk, twenty one markets with the
use of five changed models by taking closing prices of each
day. Every model present altered results for each state.
Although these impacts are widespread for the state of
Pakistan, Taiwan and Philippine. Study also reveal that out of
five models four models provide evidence for positive
seasonality pattern for the state of Turkey, Thailand and
Malaysia but there was no seasonality pattern for most of the
emerging markets. Study reveals that there was Monday
impact found in South Africa.
 Plimsoll, et al. [2] investigated the top index price (TOPI)
and all share index (ALSI) and used the same methodology as
Basher and Sadorsky [13]. Study was basically done to
confirm or reject the result concluded. Sutheebanjard and
Premchaiswadi [42] said that Monday has more return as
compared to other days by analyzing the daily returns of
Thailand stock exchange during the period of 2005 January to
march 31 2009. The results of this study should be infer with
high observance because of exclusive features of Thailand
stock market (see Aggarwal, et al. [43]. Jaffe and Westerfield
[14] investigated the stocks of UK, US, Canada, Australia and
Japan because of these countries generate 87% stock market
listed returns of the world. Study analyzed the weekly and
daily returns and found every selected countries have daily and
weekly effect. Study also reveals in contradiction that there
was low return on Tuesday for Australian and Japanese stock
markets. That study had particular importance because of its
comparison between formed and emerging markets. See
Barone [44]. Results of their research strongly recommend the
sighting the seasonality effects in emerging markets.
Chen, et al. [34] studied the 13 US price indices over
period of 1993 to 2007 and concluded that there was no any
Monday effect but significant weekend effect was found.
Steeley [11] test the significance of UK stock market using the
daily returns over the period of 1991 to 1998 and found day of
week effect in FTSE index.
BothChen, et al. [34] and Steeley [11] highlight the
convenience of recognizing anomaly or deficiency in that
department. On the off chance that one can distinguish
seasonality with sureness; a methodology can be made to
concentrate any benefits accessible. On the off chance that no
seasonality is distinguished, markets may "avail" in being
productive, and speculators can accept their choices are
construct exclusively with respect to behavioral predilections
and not any kind of market disparities. Thus, a study
uncovering distinctive sorts of abnormalities on one specific
market over a solitary time period is required and justified.
Numerous studies uncover a noteworthy day-of-the-week
impact that is not simply limited to a Monday and a Friday.
Bayar and Kan [45] considered the subsequent 19 states
for day’s effect, Austria, Australia, Belgium, Canada,
Denmark, France, Finland, Germany, Italy, Japan, Hong
Kong, New Zealand, Norway, Netherlands, Sweden, Spain,
Switzerland, US and UK. The sample period was consist of
July 1993 to July 1998 based on dummy variables by applying
the ordinary least square method. Results were according to
two aspects. One define the pattern in terms of local currency
and the other one define in dollar term. In terms of local
currency Tuesday and Wednesday have higher return but there
was less return on last days of week Friday and Thursday. For
dollar twelve states shows high return on Tuesday and
Wednesday and less return was found on Thursday and Friday.
This study is very beneficial because there was existence of
seasonality pattern on almost all the days of the week but
return on different day for the different country.
49
Abraham and Ikenberry [46] investigate the stock indices
of Belgium, Brazil, Australia, Canada, France, Denmark,
Hong Kong, Germany, Italy, Mexico, Japan, Luxembourg,
Netherlands, New Zealand, Sweden, Singapore, Switzerland,
US and UK. This study used the ordinary least square
methodology for all the above explained countries and
concluded that there was Monday, Tuesday, Wednesday,
Thursday and Friday impact for various countries but Friday
and Wednesday effect was strongly found. South Africa was
not include in both studies of Abraham and Ikenberry [46] and
Bayar and Kan [45].
Balaban [47] concluded that there was high stock return
and low standard deviation on Friday tracked by Wednesday,
based on Turkish index over 1988 to 1994. He also concluded
that day of the week effect changes according to magnitude
and direction during a year. Dubois and Louvet [38] used the
indices of nine countries and determined the positive
Wednesday and negative Tuesday and Monday effect during
the period of 1969 to 1992. Aggarwal and Rivoli [48]
evaluated the Singapore, Malaysia, Hong Kong and
Philippines for the period of September 1976- June 1988.
Study also found the strong Tuesday impact (also see Barone
[44].
Holiday or the before holiday impact has also much
importance. Preholiday impact has high abnormal return on
the days before holidays. This seasonality bring much
curiosity for investors. The days before holidays are said to be
lower liquid days that means less cash. Therefore investors sell
their securities to have more cash before holidays. Investors
do lessen their stockholding before a holiday because of their
supposed bad beliefs about an info. Most of the investors sell
their securities on the day before holiday therefore share prices
goes down earlier a holiday. Now a day there is a new trend of
buying securities on the day before a holiday when the prices
of shares are low and sell the shares after the holidays when
other investors are busy to buy the shares.
When the other investors are busy to buy the securities the
prices of share will increase, which is the best time for selling.
Marrett and Worthington [18] describe that holiday impact is
because of the psychology of investors, indicating that
investors have a tendency to purchase shares before holidays
due to great spirit and holiday excitement. Lakonishok and
Smidt [16] investigated the DJIA index and concluded
preholiday return was twenty three time higher than the return
on any regular day, this increase represent round about fifty
percent of total increase in price of DJIA. Cadsby and Ratner
[26] studied the eleven stock indices gathered from the ten
different countries and applied the A.M on each indices and
also compared them with each other. Results described that
five out of ten countries have significant holiday impact e.g.
US, Canada, Hong Kong, Japan. This study lightens the
necessity of anomalies outside the United States. Study also
explains the merits of finding a pre-holiday impact in various
countries as each country has its specific characteristics.
 III. DATA AND METHODOLOGY
In this study stock return of KSE-100 Index is used. KSE-
100 index is an index that This study includes the daily stock
returns of Karachi stock exchange 100 index. Karachi stock
exchange 100 index is a business quality biased index and
records for pretty nearly 85% of the aggregate business
underwriting. Study used the data for the period of 1991 to
2015 for the day wise returns, for the week wise and month
wise returns. To lessen the impact of high values of Day wise
prices of stock, we ascertain log returns utilizing the
accompanying equation.
R = ln KSE100t –– ln KSE100t-1*100Ali and Akbar [25],
Mustafa and Nishat [49], Abdalla [50].
Where R denoted for the stock returns of KSE 100 index
and KSE 100t is the value of stock price at time T(current day)
and KSE100t-1 is the worth of stock price on time T-
1(previous day). We have the last day return of month as
monthly return and last day of week return as weekly return.
There was three time changes in the Pakistani business market
and holidays was rescheduled for three times in Pakistan
according to Ali and Akbar [25]. Following lines interpret
around the official days and the public holidays in prevailing
in the Pakistan.
To test the daily impacts we separate our examination into
three sections, 1st section deals when marketplace stayed shut
on Thursdays & Fridays Ali and Akbar [25], For Period II
when business stayed shut on Fridays & Saturdays Ali and
Akbar [25]. For period iii when the business stayed shut on
Saturday and Sunday [25]. A general examination is likewise
completed for all the working days in a week. Here dummies
represent all the days in a week, this would help taking a
glimpse at any unusual stock return for any successive
working days for the whole period.
To test the week of the month effect, author has included
each week having complete seven days in a calendar. All the
weeks that have five days or less than seven days in a calendar
are excluded from the study. Hence this study include each
week consist of five working days on which stocks are traded.
In this study author has denominated the weeks as W1, W2,
W3, and W4 in a month and value of the last day of the week
is used as the stock return value of the week. Since weekly
impact could be checked independent of the actuality what
was the end day in a week for every month subsequently the
examination is stretched out sensibly to the whole period from
1991 to 2015.
Analysis of month wise data present controlled
information for the period used in this research subsequently
this investigation covers the twenty four years, this
information purposed that twenty four observations of
monthly closing stocks are available to test the month wise
anomaly. Though significance of the investigation for all the
days in a week, weeks in a month and months in a year would
be tested with the help of T-test. This study has use the log
return because subsequent arrangement of log return does not
show any pattern. Hence this arrangement of data is stationary
50
and it has zero mean and also has consistent change. In this
manner, ordinary least square technique would be utilized to
investigate the data and generate true results.
R = @ + βij D + εit
Where R shows the return calculated by using the formula
(ln KSE100t – ln KSE100t-1) and D shows a dummy variable
indicating days in a week.
Least square technique is the key technique that was
utilized by the other researchers to investigate the day wise
impact in KSE. Anyway their Inadequacy lies in using only
one regression to discover impact on all exchanging days of
the week. This methodology is possible just on the off chance
that we hold an earlier opinion that an impact exists on one
particular day, for example, Monday. Though, this condition
is not suitable if there is no hopes on which of the Day-of-the-
Week Effect may exist. This study would not depend on only
one technique to discover the day wise anomaly. Descriptive
statistics technique would also be utilized to ascertain the true
results Borges [51]. Study has used the following regression
line to ascertain the results.
Rt =αt + β(MON)t+ β(TUE)t+ β(WED)t+ β(THU)t+ β(FRI)t+
β(SAT)t+ β(SUN)t+ μt
Where,
Rt = Return of KSE 100 Index on the day t,
αt = intercept
MONt = 1 would be assign to dummy variable if t was Monday
and 0 for any other day.
TUEt = 1 would be assign to dummy variable if t was Tuesday
and 0 for any other day.
WEDt = 1 would be assign to dummy variable if t was
Wednesday and 0 for any other day.
THUt = 1 would be assign to dummy variable if t was
Thursday and 0 for any other day.
FRIt= 1 would be assign to dummy variable if t was Friday
and 0 for any other day.
SATt= 1 would be assign to dummy variable if t was Saturday
and 0 for any other day.
SUNt = 1 would be assign to dummy variable if t was Sunday
and 0 for any other day.
Rt =αt + β(1st week)t+ β(2nd week)t+ β(3rd week)t+ β(4th
week)t+μt\
Where,
1st week = 1 would be assign to dummy variable if t was week
1 and 0 for any other day.
2nd week = 1 would be assign to dummy variable if t was week
2 and 0 for any other day.
3rd week = 1 would be assign to dummy variable if t was week
3 and 0 for any other day.
4th week = 1 would be assign to dummy variable if t was week
4 and 0 for any other day.
 1992 containing the holiday of Thursday and Friday. Table 4.1
Rt =αt + β(January)t+ β(February)t+ β(march)t+ β(April)t+ shows the results of period one. Here results derived with the
β(may)t+ β(June)t+ β(July)t+ β(August)t+ β(September)t + help of OLS shows that all the days shows the insignificancy
β(October)t+ β(November)t+ β(December)t +μt except the Monday that shows significance and prove there is
Monday affect. Ali and Akbar [25] had analyzed the Pakistani
Where,
stock market from the period of 1992 to 2006, and found that
January = 1 would be assign to dummy variable if t was there was positive return for Monday. As here Monday is a
January and 0 for any other day. third day of week so can say that research shows third day
February = 1 would be assign to dummy variable if t was effect. Positive and significant Monday return was also found
February and 0 for any other day. in other countries. Berument and Kiymaz [39] test the S&P
March = 1 would be assign to dummy variable if t was index with the help of OLS during the period of Jan. 1973 to
March and 0 for any other day. 1997 October. Study concluded that there was Monday and
Wednesday impact for the period of 1973 to 1987.
April = 1 would be assign to dummy variable if t was April
and 0 for any other day. Results of the study found that there was significant and
positive return on Monday while significant negative impact
May = 1 would be assign to dummy variable if t was MAY
for the day of Friday was also found. See also Ajayi, et al. [40].
and 0 for any other day.
Table 2: Descriptive statistics period 1
June = 1 would be assign to dummy variable if t was June and
0 for any other day. Sequence t-
July = 1 would be assign to dummy variable if t was July and Days Coeff. Prob.
of Days Statistic
0 for any other day. -
August = 1 would be assign to dummy variable if t was August Day # 1 Sat 0.0002 -0.09778 0.922
and 0 for any other day. -
September = 1 would be assign to dummy variable if t was Day # 2 Sun 0.0001 -0.04915 0.960
September and 0 for any other day.
October = 1 would be assign to dummy variable if t was Day # 3 Mon 0.0108 3.61005 0.000
October and 0 for any other day.
Day # 4 Tue 0.0026 0.89165 0.374
November = 1 would be assign to dummy variable if t was
-
November and 0 for any other day.
Day # 5 Wed 0.0006 -0.21638 0.829
December = 1 would be assign to dummy variable if t was
December and 0 for any other day.
This investigation shows Saturday, Sunday and
Table 1: Ordinary least square period 1 Wednesday have negative return. Ali and Akbar [25] also
SAT SUN MON conclude that Saturday have negative return in Pakistani
equity market. Evidence for the negative Sunday and
Mean -0.000059 -0.000030 0.002178 Wednesday was also found during analyzing the Pakistani
Jarque-Bera 1148.482 522.4308 4097.003 equity market by Ali and Akbar [25]. The above investigation
Probability 0 0 0 reveals that market begins with negative returns and then goes
for recovery with middle day of the week and again goes down
Sum -0.008679 -0.004463 0.315845 at the end of the week. As the period one consist of November
Sum Sq. Dev. 0.004305 0.006331 0.013963 1991 to February 1992 so there are less observations so results
Observations 145 145 145 can’t endorsed full information to make final conclusion. We
have also calculated the numerous descriptive statistics for the
TUE WED Karachi stock exchange 100 index for first period.
Mean 0.000538 -0.000129 Results of descriptive statistics (Table 4.2) showed that
Jarque-Bera 493.7102 1733.997 Saturday, Sunday and Wednesday has negative mean return
while the Monday and Tuesday have positive return. Ali and
Probability 0 0 Akbar [25] also found positive mean return while testing the
Sum 0.078068 -0.018718 descriptive statistics for Pakistani stock market. Here Monday
Sum Sq. Dev. 0.007606 0.007659 have highest return as compared to any other days. Results of
descriptive statistics proved the validity of OLS results.
Observations 145 145 Standard deviation of the Monday (middle day of the week) is
IV. RESULTS AND DISCUSSION greater than all the other days that show return on Monday is
more volatile as compared to other days. Jarque-Bera test is
As we have divided the daily data into three periods.
significant for all the days that shows return variable is not
Period 1 shows the returns from November 1991 to February
51
normally distributed at 1% level of alpha. Second period hypothesis that there is same stock return for all the days. In
consist of 1085 observation from March 1992 to February this study Sunday, Monday and Thursday shows significance
1997 with the holiday of Friday and Saturday. Results of the at 1% level while Wednesday shows significance at 5% level
second periods are shown in table 4.3.Second period shows and Tuesday remains insignificant. Results of the second
that Sunday and Monday have negative significant return. Ali period (table 4.4) represented by the descriptive statistics
and Akbar [25] investigated the Pakistani stock market and follow the same pattern shown by the results of OLS
found that Monday’s return was negative for second period technique. Results shows that first two days of the week
and also found negative Sunday return in period one. (Sunday, Monday) have negative return while the middle day
Table :3 Ordinary least square period 2 (Tuesday) and last two days (Wednesday, Thursday) of the
week shows positive return. These results confirm the results
Sequence t- of Ali and Akbar [25] for Tuesday, Wednesday and Thursday
of Days Coefficient Statistic Prob. while testing the descriptive statistics of second period.
Days
Jarque- Bera test is significant for all the days at 1% level,
- which displays return is not normally distributed.
SUN -0.002252 0.009
DAY # 1 2.621206
Table 5: Ordinary least square period 3
-
MON -0.002126 0.011
DAY # 2 2.556412 Name of
DAY # 3 TUE 0.00127 1.523259 0.128 Sequence Coef. t-Statistic Prob.
Days
DAY # 4 WED 0.001804 2.174403 0.03 of Days
DAY # 5 THU 0.002065 2.443606 0.015
DAY # 1 MON -0.00058 -1.11359 0.2655
Table 4 : Descriptive statistics period 2.
DAY # 2 TUE 0.000683 1.294135 0.1957
DAY 1 DAY 2 DAY 3
SUN MON TUE DAY # 3 WED 0.001566 2.99421 0.0028
Mean -0.00043 -0.00043 0.0004
Std. Dev. 0.005893 0.00512 0.005829 DAY # 4 THU 0.000575 1.090959 0.2753
Jarque-Bera 25729.63 11268.5 12099.84 DAY # 5 FRI 0.000909 1.699919 0.0892
Probability 0 0 0
Table 6: Descriptive statistics period 3
Sum -0.465912 -0.46972 0.4008
SumSq. Dev. 0.037611 0.02847 0.0368 DAY 1 DAY 2 DAY 3
Observations 1084 1084 1084 MON TUE WED
Mean -0.00012 0.000136 0.000317
DAY 4 DAY 5 0.008294 0.006877 0.00705
td. Dev.
WED THU Jarque-Bera 277065 327380.9 384878.8
Mean 0.0003 0.000408 Probability 0 0 0
Std. Dev. 0.006 0.005393 Sum -0.52782 0.609549 1.424188
Jarque-Bera 14511 25499.73 SumSq. Dev. 0.308672 0.212175 0.223046
Observations 4488 4488 4488
Probability 0 0
DAY 4 DAY5
Sum 0.28 0.441945
THU FRI
SumSq. Dev. 0.034 0.031503
Mean 0.000115 0.000176
Observations 1084 1084
td. Dev. 0.006214 0.006544
Haroon and Shah [52] analyzed the daily stock return from Jarque-Bera 162617.7 316831.4
KSE-100 index and found that there is no impact of days on Probability 0 0
return in sub period 1 (2004-2007). Sub period 2 found that Sum 0.514553 0.791571
there was negative impact on Monday [60] but Friday was SumSq. Dev. 0.173278 0.192137
positive. Tuesday has positive but insignificant result while
Observations 4488 4488
the last days of the week Wednesday and Thursday has the
positive and significant results according to the ordinary least
square. Ali and Akbar [25] found positive return for Third period include the more than 4000 observations from
Wednesday. Berument and Kiymaz [39] analyzed the S&P the period of March 1997 to May 2014 consist of holidays of
index and found that Wednesday has altered significant result Saturday and Sunday. Table 4.5 shows the results of 3rd
as compared to other days. This situation rejects the null period.

52
 In this periods a wide range of observations are included, days of the week shows negative returns and days near to
this category show that all of the days are insignificant, but the holidays shows positive returns, but the third day has highest
Wednesday unveil surplus return that was proved at 1% level and more significant return. Results of the third period (table
of significance. Ali and Akbar [25] analyzed the Pakistani 4.6) showed that Wednesday has inordinate mean return as
stock market and found Wednesday, Thursday and Friday compared to other days. Results of the descriptive statistics
have positive return. Haroon and Shah [52] investigated days prove that Wednesday (Day 3) has more return as compared
of the week effect by using the data of Karachi stock exchange to other days [61]. While testing the descriptive statistics of
100 index and conclude no day wise impact in period one the third period from 1997 to 2006 Ali and Akbar [25] found
second period show positive Friday and negative Monday. positive mean return for the Wednesday. Hence it proved that
While the Friday is also significant at 10% level of alpha there was third day effect in KSE-100 index. P value of jarque-
but it does not have more returns as compared to Wednesday Bera test is zero for all the days which indicate return is not
return. As the coefficient value of Wednesday is greater than normally distributed at 1% level of significance.
Friday. If we compared the second period Wednesday has To know the comprehensive results study includes the
positive and significant result in that period also. Ali and whole daily data into one model (table 4.7) by assigning the
Akbar [25] Found Wednesday had positive return in third numbers to the days of week. Study assigns the numbers to the
period. Bayar and Kan [45] analyzed nineteen countries and working days from Day # 1 to Day 5. As in the first period
found higher return on Wednesday (see also Agrawal and Saturday is the first working day so author assign the Saturday
Tandon [53]. Balaban [47] that there was high stock return and as Day # 1 and it continued for all the working days of the first
low standard deviation on Friday tracked by Wednesday, period. In the second period Sunday is the first working day
based on Turkish index over 1988 to 1994.Dubois and Louvet so the author assign the Sunday as Day # 1 and continued for
[38] Used the indices of nine countries and determined the the last working day as Day # 5. In the third period first
positive Wednesday and negative Tuesday and Monday effect working day is Monday so author defines Monday as Day # 1
during the period of 1969 to 1992.As here Wednesday is the for the third period, and continued till the last working days as
third day of the week so research shows middle day effect. Day # 5.
Here Monday have negative but insignificant return that was These results include the data from 11th February 1991 to
showed significant and negative return in period two 28 MAY 2015. Whole period results shows that day 1 has
Table 7: Ordinary least square whole period results. negative return and it is significant at 5% level of alpha. Day
2 has positive and significant return at 10% of alpha. Day 3
t- has highest return and most significant at 1% level as
Days Coefficient Statistic Prob. compared to other days, as also founded in the third period of
DAY1 -0.00091 -1.94569 0.0517 daily return. Ali and Akbar [25] analyzed the days impact and
DAY2 0.000837 1.804629 0.0712 found that day third has positive and significant return. While
0.001233 2.646849 0.0081 the Day 4 and Day 5 also has positive return. Ali and Akbar
DAY3
[25] also found that fourth and fifth day has positive return.
DAY4 0.000666 1.4275 0.1535
Whole period results also proved the middle day of the week
DAY5 0.001124 2.377571 0.0175 effect for the Karachi stock exchange 100 index in Pakistan.
Table 9: Ordinary least square week wise
Table 8: Descriptive statistics whole period results.
Variables Coefficient t-Stat. Prob.
DAY1 DAY2 DAY3 WEEK1 0.007362 3.242568 0.0012
Mean -0.00018 0.000169 0.000247 WEEK2 0.004332 1.908119 0.0566
Std. Dev. 0.007922 0.006834 0.006856 WEEK3 0.00274 1.206639 0.2278
Jarque-Bera 350444 430086.2 347900.7 WEEK4 -0.002359 -1.03364 0.3015
Probability 0 0 0
Table 10: Descriptive statistics week wise.
Observations 5469 5469 5469
DAY4 DAY5 WEEK1 WEEK2 WEEK3 WEEK4
Mean 0.000133 0.000219 Mean 0.001845 0.001086 0.000687 -0.00059
Std. Dev. 0.006229 0.006458 Std.
Jarque-Bera 166336.6 331531.7 Dev. 0.019138 0.016596 0.019996 0.020724
Jarque-
Probability 0 0
Bera 9543.325 15081.73 30881.9 18946.1
Observations 5469 5469 Prob. 0 0 0 0
Sum 2.083391 1.22599 0.775281 -0.66059
While Tuesday show positive and insignificant result in SumSq.
both periods. Overall results of both period shows that starting Dev. 0.413154 0.310666 0.451028 0.484466

53
 While the jarque-Bera test shows significant results for all the
To test the validity of these results descriptive statistics weeks which accept that return is not normally distributed. To
may be used. (Table 4.8 shows descriptive statistics of whole ascertain the monthly effect we regress the data without taking
period. These results include 5469 observation that are enough any intercept or the bench mark category. Results (table 4.11)
to check the validity of research. Results of descriptive indicate that all the months have positive returns except the
statistics showed that day 1 has negative return while the all month of May and August that has negative returns. P values
other days have positive return. Mean values shows that day 3 shows that all the months have no significant returns except
have more mean return as compared to any other day. the month of May that has significant but negative returns.
Probability value of jarque-Bera for all the days rejects the null Patel, Jayen B [57] analyzed the U.S stock market and
hypothesis at 1% level of significance. To analyze the week concluded that there was no January effect in that market.
wise impact of stock anomalies in Pakistan this study run with Table 12: Descriptive statistics month wise.
specific assumptions. For easy handling of the data this study
Std. Jarque-
has divided a month into four week and each week consist of
Month Mean Dev. Bera Prob. Obs.
five working days in a week having the recent value of the
JAN 0.00236 0.0297 13644.1 0 283
return that would be used to investigate the week wise impact.
FEB 0.002298 0.0215 13425.5 0 283
Since our investigation for weekend is not influenced by MAR 0.001002 0.0219 10309.1 0 283
the market correction of holidays and working days sequence 0.001795 0.0158 12783.2 0 283
APR
consequently the whole information from November 1991 to
MAY -0.003258 0.0357 54740.7 0 283
October 2015 is designed in the same manner. As the stock
JUN 0.000925 0.0184 23724.7 0 283
market in Pakistan remains close on Thursday, Friday for the
JUL 0.001816 0.0293 10427.7 0 283
1st period, and market remains close for the day of Friday,
Saturday in 2nd period, while in third period market remains AUG -0.001427 0.0230 5435.21 0 283
closed on the day of Saturday and Sunday. Ali and Akbar [25]. SEP 0.001441 0.0174 8295.64 0 283
Simply we have taken the five days returns without including OCT 0.001337 0.0257 55846.4 0 283
holidays return. NOV 0.000697 0.0228 22878. 0 283
DEC 0.002286 0.0398 51693.4 0 283
Table 4.9 shows that first three weeks have positive
returns. First two weeks shows significant positive return.
While the fourth week has negative and insignificant return. Zafar, et al. [54] analyzed the Karachi stock form 1991 to
Ali and Akbar [25] analyzed the weekly effect of Pakistani 2007 and found that month of MAY had negative and
stock market and found that first three weeks have positive significant return with the use of OLS technique. Rafique and
return while the last week of the month have negative return. Shah [55] investigated the share prices of Karachi stock
Results of Ali and Akbar [25] confirm the results concluded in exchange and found that month of MAY, June and August had
this study. The value of T-statistics of first week shows the negative return. According to Rafique and Shah [55]. “We
significance at 1% level. have found one significant coefficient (-0.529986) for the
dummy Variable of MAY (D5t) which enables us to believe
Table 11: Ordinary least square month wise.
that mean returns Of each month are not equal to each other
Std. t- and thus not equal to zero. This provides evidence for the
Variable Coefficient Error Statistic Prob. negative anomaly in returns for the Month of May (May
Effect) instead of a January Effect.” Result of table 4.12
JAN 0.027834 0.018331 1.518361 0.1301
indicates that all the months have positive mean returns except
FEB 0.027097 0.018331 1.478162 0.1405 the month of May and August. Jarque-Bera test shows that all
MAR 0.01182 0.018331 0.6448 0.5196 the months is not normally distributed and reject the null
APR 0.021161 0.018331 1.154377 0.2494 hypothesis at 1% level of significance.
MAY -0.03842 0.018331 -2.096 0.037 V. CONCLUSION
JUN 0.011378 0.018726 0.607638 0.5439
This study done a complete investigation of the calendar
JUL 0.022344 0.018726 1.193225 0.2338 seasonality with the use of Karachi stock exchange hundred
AUG -0.01756 0.018726 -0.93781 0.3492 index for the period of 1991 to 2015. Hence this investigation
SEP 0.017733 0.018726 0.947007 0.3445 has research the answer to these questions: (i) whether the
OCT 0.016451 0.018726 0.878522 0.3804 starting days of the week have more return or ending days of
NOV 0.008576 0.018726 0.458005 0.6473 the week? (ii) Whether the Friday has negative return? To find
DEC 0.026958 0.018331 1.470615 0.1426 the answers of above explained questions study have use the
descriptive statistics and regression technique. Rafique and
Weekly results of the descriptive study (table 4.10) shows Shah [55], Ali and Akbar [25] and Zafar, et al. [54] use the
that all the weeks have positive return except last week of the same techniques to analyze the stock anomaly in KSE-100
month.Week1 has more return as compared to any other day. index. These tests had been used very rarely to analyze the
seasonality that’s why this study present a complete
54
investigation of the research questions being tested. Moreover,
a large number of studies about the anomalies in Pakistan have
focused on the daily seasonality in KSE (Zafar, et al. [54],
Mustafa and Nishat [49], and Nishat and Mustafa [56].
This section represents the summary of findings of
empirical analysis of this study. Generally this study suggests
that equity market of Pakistan is not a weak form efficient
market. The daily findings of this study suggest that an
investor can buy the shares from stock market on first day of
the week due to fewer prices on that day, and can sell on the
third day of the week due high return on that day in Pakistan.
Lakonishok and Maberly [35] said that there may be bad news
or any bad roamer behind the negative Monday return.
Investors can purchase first day of the week I.e. Monday as it
have low price and can sell shares on the third day of week due
to highest return on that day. A study established with the help
thirty stocks by the Dow Jones Index, Gibbons and Hess [12]
also derived the results that Monday had negative return.
These results proved that seasonality exist in the stock market
of Pakistan. This conclusion is consistent with the results of
Ali and Akbar [25] and Zafar, et al. [54].
Weekly results showed that there was high and surplus
return on starting week of the month while the last week of the
month has negative return, which shows that an investor can
buy the stocks at the end of the month and could sell during
first week of the month to earn high profit. Monthly analysis
shows that return on month of MAY and August was negative
and all the other months are positive especially the month of
January has highest positive mean return as compared to any
other positive month of the year throughout the complete
period examined in this research. These results proved that
seasonality exist in stock exchange. This conclusion is reliable
as the results of Ali and Akbar [25] and Zafar, et al. [54].
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