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Seasonality in the Returns: A Study of BSE Sensex

International Journal of Financial Management

Volume 3 Issue 1

Published: 2013
Author(s) Name: M. Sriram, P. Renuka Devi | Author(s) Affiliation: Department of Management Sciences, D.J.Academy for Managerial Excellence, Coimbatore.
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The presence of seasonal/monthly effect in stock returns was investigated using monthly return data of BSE Sensex for the period April 2004 to March 2012. After examining the stationarity of the return series, an Autoregressive Moving Average (ARMA) model is specified to find the monthly effect in stock returns. The results do not confirm the existence of seasonality in stock returns and the January effect. The findings are also inconsistent with ‘Tax-loss selling’ hypothesis. The results of the study imply that the stock market is efficient. The study suggests analysing the ‘Day of the Week’ effect to enable the investors to devise better strategies to improve their returns.

Keywords: Stationarity, Seasonality, ARMA, Tax- Selling Hypothesis, Market Efficiency

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