CONSENT OF THE GUIDE / SUPERVISOR

To,
The Registrar
Pacific University
Udaipur
Rajasthan

Respected Sir,
I am registered guide / supervisor for the Ph.D programme in the Subject of
MANAGEMENT as per Letter No : PAHERU/DPGS/2012 and dated : 13/08/2012 of
PACIFIC UNIVERSITY received by me. I am consent and undertake the responsibility that I
shall work as Guide / Supervisor of Ms. Jyotiben Ishwarlal Ghanchi, daughter of Mr.
Ishwarlal Narandas Ghanchi register as scholar under title:
CALENDAR ANAMOLIES ON INDIAN STOCK MARKET RETURNS : A STUDY OF
SPOT AND DERIVATIVE TRADING
In subject of MANAGEMENT and instruction give by Act, Ordinance, Statutes of PACIFIC
UNIVERSITY, UDAIPUR, Rajasthan.

Guide / Supervisor:
Dr. Kamaleshkumar K. Patel

A
Synopsis of The Proposed Study
On
Calendar Anomalies on Indian Stock Market Returns :
A Study of Spot and Derivative Trading

By :
Ms. Jyotiben I. Ghanchi
Assistant Professor
Department of Management Studies
Ahmedabad Institute of Technology
Ahmedabad, Gujarat

Under the Supervision of :

Dr. Kamalesh K. Patel

Faculty of Management
PACIFIC ACADEMY OF HIGHER EDUCATION AND RESEARCH UNIVERSITY
UDAIPUR

ABSTRACT
In the context of financial markets, Investors are generally concerned with returns on their
investments and timing of the investments. Especially in the case of returns from spot and
derivatives market, several Seasonal Effects create higher or lower returns depending on the
time. Some of the effects are Day-of the week effect, Week of the month effect, etc. These
effects cannot be explained by basic pricing models (traditional asset pricing models). Also
change in price because of such effect violets the weaker form of EMH (efficient market
hypothesis). Many researchers have documented different time pattern in security returns
from spot and derivative trading.
The study would be useful to the investors to predict share price behaviour considering
proper understanding of the anomalies. In this periodical study, we are planning investigate
effect of different calendar anomalies on the spot and derivatives trading returns using
different statistical tests on the basic data of share price or futures price (in case of derivative)
of some selected representative stocks.

IMPORTANCE / RATIONALE OF
PROPOSED INVESTIGATION
For the investor, investment is a very important decision (when to invest) considering risk
involved or volatility of returns. As a result of calendar anomalies, share price may increase
or decrease on some particular day/ week or month which ultimately cause to some risk and
volatility in returns. Investment decision would become an easy task if one can find the
certain pattern in this volatility. Many studies were done to find out the relation between such
anomalies and volatility of returns. But many of them dont provide sufficient information for
users or general investors. Also the findings of these studies are not in agreement with each
other. The suggested study would be useful to all 3 types of investors hedger, arbitrageur
and speculators in formation of different trading strategies to gain sufficient amount of
profits. Also the study would be helpful to every investor in terms of planning of investment.

SCOPE OF THE PROPOSED STUDY

The share price behaviour in one market spreads slowly to the other developing and
developed markets. The presence of Calendar Anomalies in stock markets across the country
is widely reported and these Anomalies should be investigated in India. The detailed
investigation of this Calendar Anomaly would help all the stakeholders in India and outside
India to plan their investment. The present study would be useful to the Native and Foreign
Investors, Traders and Arbitrageurs who can formulate profitable Trading Strategies. This
study is of great use to predict the share price behaviour, if Anomalies are properly
understood.
As an attempt of market risk reduction of stocks, the compulsory rolling settlement system
was introduced by SEBI on 2nd January,2002 in the stock exchanges. Though this system
leads to high turnover, it creates impact on the Anomalous Behaviour of the stock prices. The
study would be an attempt to identify the Calendar Anomalies in the Indian Stock Market
during the Post Rolling Settlement Period.
The study would be done for selective 50 stocks which are part of the CNX Nifty in National
Stock Exchange of India. In the proposed study the share prices of different stocks would be
taken and the effect of calendar anomalies on the returns from spot and derivatives market
would be analyzed.
Scope for Further Research
The Scope for Further Research is summarized below.
1. A study, with similar objectives, could be made from time to time.
2. A comparative study could be made before and after the introduction of Compulsory
Rolling Settlement System.
3. A comparative study, with similar objectives, could be made to study the in between
ideas of Indian Stock Market and indices of other Stock Markets like Dow Jones
Industrial Average, NYSE, etc.
4. A study, with similar objectives, could be made on Sectoral Indices like Automobile,
IT, FMCG, Metal etc.
5. A study could be made to analyze the Seasonality Effect on Exchange Rate and ETF
etc.

LITERATURE REVIEW AND PREVIOUS STUDIES

Sarma.SN (2004), in his paper entitled, Stock Market Seasonality in an Emerging

Market, explored the presence of Seasonality in the Indian Stock Market returns during the
post liberalization period. The study provided evidence to the presence of Seasonality across
the days of the week. The study confirmed the conclusions of earlier studies as to the
leptokurtic distribution of equity returns, presence of high variance on Mondays, Weekend
Effect and Regularity of Returns across the Indices.
The paper entitled, Seasonality in Asias Emerging Stock Markets: India and Malaysia,
by Chotigcat T, Pandey IM (2005), investigated the Monthly Effect on stock returns for the
Stock Market in India and Malaysia. This study confirmed the existence of Seasonality in
stock returns in Capital Markets, and suggested that the Indian Stock Market would move in
the direction of higher level of efficiency and investors would earn returns commensurate
with risk.
Bing Zhang, Xindan li (2006), in their paper entitled, Do Calendar Effects Still Exist in
the Chinese Stock Markets?, investigated time varying Calendar Effect in the Chinese
Stock Market, using the GARCH (1,1) GED(General Error Distribution) Model. The study
found that the Friday Effect exists with low volatility at the early stage, but since 1997, the
Positive Tuesday Effect has been noticed. Besides, there was a Small Firm January Effect
with high volatility. The Turn-of-the Month Effect has also disappeared in the Chinese Stock
Market since 1997.
The study entitled, Evidence on Weak Form Efficiency and Day of the Week Effect in
the Indian Stock Market, by Sunil Poshakwale (1996), used daily closing prices of
Bombay Stock Exchange Index from 2nd January 1987 to 31st October 1994. The results
provided evidence of Day of the Week Effect observed on the BSE.
Another study entitled, Day-of-the Week Effects on the Bombay Stock Exchange, by
Ravi Anshuman V, Ranadev Goswami (2000), examined the Week- End Effects by using
equally weighted portfolio constructed from 70 stocks listed on the BSE during the period
(April 1991 March 1996). The study evidenced the (heteroskedasticity adjusted) excess
positive returns on Friday and excess negative returns on Tuesday.

Amanulla S, Thiripalraju (2001), in their study entitled, WeekEnd Effect: New Evidence
from the Indian Stock Markets, proposed to find out whether the carry - forward
transactions in different periods have any impact on Week-End Effect in Indian Stock Market.
This study used the daily stock returns of 82 companies traded in the BSE with respect to
indices viz, BSE Sensex, BSE National index and S&P CNX Nifty Index to identify WeekEnd Effects. The results from the sub-sample period strongly supported the existence of
week-end effect during the period of ban on carry forward (badla) transactions. This study
also evidenced a reversal in Week-End Effects, i.e., positive Monday return and negative
Friday return in modified and revised modified carry forward transactions.
Another study entitled, Day of the Week Effect Anomaly in the Indian Equity Market,
carried out by Goloka C Nath, Manoj Dalvi (2005), used both high frequency and end of day
data for the benchmark index (S&P CNX Nifty). The study, using Regression with bi-weights
and dummy variables, found that before the introduction of Rolling Settlement in January
2002, Monday and Friday were significant days. However, after the introduction of the
Rolling Settlement, Friday has become significant. Mondays were found to have higher
Standard Deviations followed by Fridays. The market inefficiency still exists and the market
was yet to price the risk appropriately.
The study entitled, Calendar Effects and the Months of the Year: Evidence from the
Mauritian Stock Exchange, by Ushad Subadar Agathee (2008), examined the possible
Month of the Year Effect in the Stock Exchange of Mauritius (SEM). The result showed that
returns were the lowest in the Month of March and highest in the Month of June. But equality
of mean returns test showed that returns were statistically the same across all months.
A study entitled, An Empirical Analysis of Semi-Monthly Effects: Evidence from the
Indian Stock Market, by Nageswari P, Selvam M, Karpagam V (2011), examined the
existence of Semi-Month Effect in the Indian Stock Market. The study found that the mean
returns in the First Half of Calendar Month were lower than the mean returns in the Second
Half of the Calendar Month during the study period. The paper reports an Insignificant SemiMonthly Effect across all years, except for 2005-06.
Chan-wung Kim, Jinwoo Park (1994), in their study entitled, Holiday Effects and Stock
Return: Further Evidence, provided evidence of the Holiday Effect in stock return. The

study reported that there was abnormally high return on the trading markets in the US,
namely, the NYSE, AMEX and NASDAQ. The Holiday Effect was also present in the UK
and Japanese Stock Markets.
A study on, Holiday Effect in the Indian Stock Market, by Madhusudan Karmarkar,
Madhumitha Chakraborty (2000), examined the Holiday Effect and found out that stock
showed abnormally high return on days prior to holidays. This study investigated the Holiday
Effect in the Indian Stock Market by comparing the mean return of Pre Holiday, Post Holiday
and Weekday.

RESEARCH METHODOLOGY

Objectives of the proposed study

The following are the objectives of the proposed study.
1. To investigate the existence of Day of the Week or Weekend Effect in the
Indian Stock Market - Spot and Derivative trading.
2. To identify the Monthly Effect in the Indian Stock Market -Spot and
Derivative trading.
3. To test the Holiday Effect in the Indian Stock Market Spot and Derivative
trading.
4. To find the existence of the Semi-Month and Turn of the Month Effect in the
5. Indian Stock Market Spot and Derivative trading.
6. To analyze the Volatility of the Returns the Indian Stock Market Spot and
Derivative trading.
7. To summarize the Findings and Suggestions of the Study.

Research Design
Sample selection : In Asia, India has one of the most efficient stock market The Indian
stock market is made up of 22 stock exchanges. The most prominent among these are
the Bombay Stock Exchange, National Stock Exchange, and Over the Counter Stock
Exchange of India. National Stock Exchange of India is one of the leading exchanges
in the world on several key parameters. Number of contracts traded relate directly to
the technology and liquidity of the exchange. NSE ranks* in top 3 globally for Stock
Futures and Index Futures and Options. Technology at the exchange remains
backstage to fulfill the demand for capacity, reliability and performance ensuring the
competitive edge of NSE as Indias number one exchange platform.
But for the purpose of this study, stocks from S&P CNX Nifty Index in NSE would be
considered as sample for this study. S&P CNX Nifty is well diversified, with 50
stocks accounting for 22 Sectors of the Economy. It is used for Benchmarking Fund
Portfolios, Index Based Derivatives and Index Funds. Further, Nifty Stocks represent
more than 50% of the Free Float Market Capitalization as on January 31th, 2013 .In
this study, 50 securities of the NSE CNX NIFTY would be considered.
Sampling Method : Judgemental or Purposive Sampling
Sample Size : 50 securities of the NSE CNX NIFTY

Sources of data : The proposed study purely relies on the daily closing price of the
stock from both, the spot market and derivative market. So, it is based on the
secondary data. The data would be collected from different financial tools like CIME,
PROWESS, ACE EQUITY Analyzer, Capitaline, etc and the websites of stock
exchanges. Also other sources like books, journals, articles, websites, etc would be
used to collect the relevant information.
Tools for analysis : For analysis of the data, different types of tools would be used like
descriptive statistics which covers mean, standard deviation etc. In addition to that
various other statistical models like Correlation model, Regression Model,etc. would
be used. Also Chi-square test, F-test, Rank co-relation test and various other types of
test would be undertaken.

Hypotheses to be tested
Null hypotheses to be tested in the proposed study are as follows1. Average daily returns would not be different among the different trading days
in a week.
2. Average monthly returns would not be different across the year.
3. Average daily returns would not be different for the starting days of the month
and the other days
4. .There would not be any difference in returns among pre, post holidays and
weekdays.
5. There is no significant relationship among the different days in a week and
months of the year.

CHAPTERIZATION SCHEME
Following is the proposed chapterization scheme for the suggested study.
Chapter-I: Introduction

This chapter would cover basic introduction about the study. It would also cover few
important concepts and descriptive terms like Efficient Market, Efficient Market
Hypothesis and some related theories. Also introduction to anomalies, calendar effect and
different time patterns would be covered.
Chapter-II: Literature Review
This chapter would include the reviews of previous studies and research done in the field of
calendar anomalies, time pattern and volatility of returns relations.
Chapter-III: Research Design
Basic design concepts and information regarding research would be covered in this chapter. It
would include Problem statement, Objectives of the suggested study, Hypothesis of the study,
Sources of data, proposed statistical tools to be used in the study and limitations of the
suggested study.
Chapter-IV: Analysis of Different Effect and Calendar Anomalies
This chapter would cover very important part of the study. The chapter would be divided in
different sections which would cover different anomalies and their effect. Each section would
cover periodic analysis of descriptive statistics with the use of different models and different
statistical tools to analyse different calendar effects like day of the week effect, Monthly
effect, Holiday effect, Turn on effect, etc. Here, Chi-square test, F-test, Rank co-relation test,
Regression Model etc. would be used for analysis purpose.
Chapter-V: Summary of Findings, Suggestions and Conclusion
This would be the last chapter. It would cover important findings, suggestions and conclusion
of the study.

LIMITATION OF THE STUDY

Basic limitations of the suggested study would be

Study is restricted to Indian derivative and spot markets only.

Study would be done for a specific time period.

Study would be based on mainly secondary data.

Data used in the study would be taken from CMIE, ACE EQUITY Analyzer,

Capitaline and PROWESS.

Some of the statistical tools would be used in the study with their inherent limitations.

BIBLIOGRAPHY
BOOKS

Bodie Z, Kane A, Marcus AJ (2002). Investment. International Edition.

Gupta SP (2008). Statistical Methods. Sultan Chand & Sons, Newe Delhi.
Prasanna Chandra (2008). Investment Analysis and Portfolio Management. Tata

McGraw Hill Publishing Company Limited, New Delhi.

Richard A. Brealey, Stewart C. Myers, Franklin Allen, Pitabas Mohanty (2007).
Principles Corporate Finance. Tata McGraw Hill Publishing Company Limited,
New Delhi.

ARTICLES

Sarma SN. (2004). Stock Market Seasonality in an Emerging Market. Vikalpa.

29(3): 35-41.
Chotigcat T, Pandey IM (2005). Seasonality in Asias Emerging Stock Markets:
India and Malaysia. (15th International Trade and Finance Association, Conference

Proceeding).
Bing Zhang, Xindan li (2006). Do Calendar Effects Still Exist in the Chinese Stock

Markets?. J. of Chinese Economic and Business Studies. 4(2): 151-163.

Sunil Poshakwale (1996). Evidence on Weak form Efficiency and Day of the Week

Effect in the Indian Stock Market. Finance India. 10(3): 605-616.

Ravi Anshuman V, Ranadev Goswami (2000). Day of the Week Effects on the

Bombay Stock Exchange. The ICFAI J. of Applied Finance. 6(4): 31-46.

Amanulla S, Thiripalraiu M (2001). Week End Effect: New Evidence from the

Indian Stock Market. Vikalpa. 26(2): 33-50.

Goloka C Nath, Manoj Dalvi (2005). Day of the Week Effect and Market
Efficiency Evidence from Indian Equity Market using High Frequency Data of

NSE. The ICFAI J. of Applied Finance. 11(2): 5-25.

Ushad Subadar Agathee (2008). Calendar Effects and the Months of the Year:
Evidence from the Mauritian Stock Exchange. International Research J. of

Finance and Economics. 14: 254-261.

Nageswari P, Selvam M, Karpagam V (2011). An Empirical Analysis of SemiMonthly Effects: Evidence from the Indian Stock Market. Management in the Age
of Innovation NCM 2011, Ed. By Sheik Mohamed, Jamal Institute of Management.

Arun Vasam Publishers, Tiruchirappalli: 312-316.

Chan- wung Kim, Jinwoo Park (1994). Holiday Effects and Stock Return: Further

Evidence. J. of Financial and Quantitative Analysis. 29(1): 145157.

Madhusudan Karmakar, Madhumitha Chakraborty (2000). Holiday Effects in the
Indian Stock Market. Finance India. 14(1): 165-172.

WEBSITES

http://www.nseindia.com/products/content/gi/product_whatisgi.htm; Access on date :

21th Feb,2013; Time : 15:00 PM

http://www.nseindia.com/invest/content/intrstn_invst_cncpts.htm; Access on date :

20th Feb,2013; Time : 23:00 PM

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2125799; Access on date : 19th

Feb,2013; Time : 22:10 PM

http://www.thefinanceconcept.com/2011/12/calendar-anomalies-equity-market.html;

Access on date : 19th Feb,2013; Time : 21:30 PM

http://www.investopedia.com; Access on date : 17th Feb,2013; Time : 21:00 PM
http://www.jccc-ugcinfonet.in; Access on date : 15th Feb,2013; Time : 20:30 PM
http://www.ssrn.com; Access on date : 18th Feb,2013; Time : 21:00 PM

Ms. Jyoti I. Ghanchi

Outline Approved
Dr. Kamlesh K. Patel