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An Investigation of the Day-of-the-Week Effect on Return and Volatility of NSE NIFTY

International Journal of Financial Management

Volume 3 Issue 4

Published: 2013
Author(s) Name: Som Sankar Sen | Author(s) Affiliation: Assistant Professor in Commerce, Rabindra Mahavidyalaya, Champadanga, Hooghly, West Bengal, India
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Abstract

The present study has sought to investigate the issue of day-of-the-week effect in Indian stock market. Applying GARCH-M model on the daily NIFTY returns data, a comparative study has been conducted to observe whether there is any difference between two sub-periods that is the period representing before the introduction of the T+2 rolling settlement and that of representing after the introduction of such system respectively regarding day-of-the-week effect in Indian stock market. The findings of the study clearly indicate that there was day-of- the- week effect in the daily NIFTY return during the pre T+2 rolling settlement period. But, such effect vanishes after the introduction of T+2 rolling settlement. However, a significant dayof- the- week effect remains in conditional volatility in the second sub-periods particularly in case of Tuesday. Application of TGARCH model has confirmed the above results.

Keywords: Day-of-the-Week effect, Volatility, GARCH-M, Dummy Variable, T+2 Rolling Settlement

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