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