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An investigation of the day-of-the-week

effect and month effect in the stock
markets of the Asia-Pacific Region
The present study seeks to inspect the existence of the day-of-
the-week effect and month-effect in five Asian-Pacific stock
indices. The article examines the presence of the calendar
anomaly in stock market returns and index volatility. Index
volatility in the five Asian-Pacific stock exchange is modelled
using EGARCH (1,1). The study hinges on the data of five
indices viz. NIFTY, HSI, S&P ASX, SSEC and STI from Jan
2010 to Sep 2023. The outcomes of our study support the
Dr. Sahaj Wadhwa presence of the day-of-the-week effect on market returns and
Assistant Professor, DU volatility in NIFTY and STI only. All five markets show an
absence of the month-effect in market returns.

Introduction

M
arket efficiency refers to showing certain patterns at specific
the potential of a stock times of the calendar.
market to assimilate
accessible information and reflect Calendar anomalies such as the
it in the stock prices in a short day-of-the-week, turn-of-the-
span of time. Efficient market year, weekend, monthly and pre-
theory presupposes that asset holiday effect are the oldest forms
prices behave randomly and of calendar anomalies (1973). The
investors have no opportunity day-of-the-week-effect anomaly has
Deepika Dewan to earn abnormal returns. Early
been broadly empirically studied
Assistant Professor, DU in developed countries. Sias and
studies found that the Dow Jones
Starks (1995) found that the Monday
Industrial Average Index in the
anomalies are persistent and as
US market shows signs of a weak
compared to Friday, Monday returns
form of efficiency. But empirically,
falls off. Golder and Macy (2011)
it has been proven that the reality
established a positive connection
is not in line with the maintained
between changes in the mood of the
theories of asset-pricing behaviour.
investors and returns on Mondays
This shows that inefficiencies may
and Fridays. The month-of-the-year
also be a characteristic of the stock effect is an unexplored anomaly.
market and anomalies might exist. Elango and Pandey (2008) found
This violates the hypothesis of the The January anomaly in Sensex
weak form of market efficiency where they observed negative
because if the markets are efficient, significant returns in January along
then calendar anomalies such as with March and April.
the day-of-the-week effect should
not exist. However, the existence Previous researchers have used
of calendar anomalies is evident different GARCH family models to
with the likelihood of stock prices measure the volatility to understand

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the impact of calendar effects. Berument et al. (2010) Literature supports that incorporating the asymmetric
applied EGARCH to find volatility in S&P500 (NASDAQ). volatility through EGARCH yields more adequate results.
Zhang et al. (2017) used GARCH (1,1) modelling to To overcome the problem of symmetry assumption,
probe the day-of-the-week effects in SHC index of the the EGARCH model was established to ascertain the
Shanghai Stock Exchange. asymmetric negative or positive effects in the model.

Calendar effect anomaly occurs owing to different It has been supported by numerous empirical studies
periods and conditions existing in a country. With the that the pessimistic news of the previous day has the
same view, our study aims to investigate the existence ability to influence present day’s volatility than the
of the day-of-the-week and monthly effect on five stock positive news. This situation refers to the leverage
exchanges of the Asia-Pacific region viz. India, Hong effect, wherein today’s level of risk for investors increases
Kong, Australia, China, and Singapore for the period due to the bad news from yesterday. The asymmetric
ranging from January 2010 to September 2023. Our volatility is represented by negative and significant γ is
study aims to find and analyze the presence of calendar (γ<0). Therefore, γ represents the leverage effect, and
anomalies in emerging markets such as India and the higher the leverage effect, the higher would be the
China, and developed stock markets viz. Singapore, volatility clustering and vice versa. The equation of the
Hong Kong, and Australia. The existing literature lacks EGARCH models is as follows:
a comprehensive view of the existence of anomalies in |εt–i| |εt–i|
prominent developed and emerging markets. log σt2 = Ƴ0 + Σip=1 Ƴi + Σip=1 θi σ + Σiq=1 ωi log σt2–i (2)
σt–i t–i

The present study focuses on testing calendar anomalies The above equation allows εt to have positive and
not just for return but also for market volatility by fitting the negative values and impact volatility differently. The
EGARCH model. Subsequent sections of the study are as daily return mean equation to model EGARCH (1,1) is
follows: the second section delineates the methodology the following:
and data analysis. The third section spells the findings,
while the fourth section comprehends conclusion. RdT = c + α1 Rdt-i + µt (3)

Where α1 is the coefficient of lag daily returns and µ is

Methodology and Data Analysis the error term. The lag term i is determined on the basis
Our study focuses on finding calendar anomaly in stock of the significant ACF and PACF terms.
market returns and stock volatility in five Asia-Pacific
region stock exchanges viz, NIFTY, National Stock The impact of index volatility on the day-of-the-
Exchange (NSE) from India, Hang Seng Index (HSI) from week anomaly was checked by running the following
Hong Kong, S&P ASX200 Australian Stock Exchange regression equation:
(S&P) from Australia, Shanghai Stock Exchange
Composite Index 000001 (SSEC) from China and Straits σ2dt = C+β1 DT +β2 DW +β3 DTh +β4 DF + σ2dt–1 (4)
Time Index (STI) from Singapore. The present study is
based on the data from January 2010 to September This equation shows that today’s volatility depends on
2023 which was extracted from Thompson Reuters. the previous day’s volatility and the day-of-the-week
effect, it exists. The EGARCH model is applicable in
the presence of heteroskedasticity only. Therefore, the
Day of the Week Fffect
ARCH LM test was run on data in question to check the
For the calculation of daily return, the formula RdT=ln fitness of the model.
(It /It-1) was applied; where, ln denotes the natural
logarithm, It is the closing index value at day, and ‘t’ It-1
Day of the Month Effect
is the closing index value at day before 't'.
To calculate the monthly index value, an average of the
The presence of the day-of-the-week effect was last day index value of the month, the index value of the
analysed through the following regression equation: preceding and succeeding trading day has been taken.

RdT = c + β1DTu + β2 DW + β3 DTh + β4 DF + eT (1) To calculated the monthly index returns, the following
formula was used:
Where RdT is the index return of the day, DTu to DF represents
the dummy variable from Tuesday to Friday, and eT is the RmT = ln(Imt /Imt-1) where, ln denotes the natural logarithm,
error term. This equation will help us to analyse if there Imt denotes the index value of the month ‘t’, and Imt-1 is
exists significant market returns for any day of the week. the index value of the previous month.

Also, to explore the day-of-the-week effect on the index The following regression is run to check the presence of
volatility, the study models volatility using EGARCH (1,1). the month effect in the monthly return series:

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RmT = ʗ +Ƴ1DFEB +Ƴ2DMAR +Ƴ3DAPR +Ƴ4DMAY +Ƴ5DJUN +Ƴ6DJUL + mean value of the daily returns of all the five markets
Ƴ7DAUG+Ƴ8DSEP+ Ƴ9DOCT+Ƴ10DNOV+Ƴ11DDEC+ εmT (5) is near zero. The value of standard deviation reveals
Where RmT is the index return of the month, DFEB to that volatility is higher than the STI market for all other
DDEC represents the dummy variable from February markets. The negative value of skewness confirms the
to December, and εmT is the error term. Equation (5) presence of asymmetric distribution.
detects the presence of significant return in applicable
particular month, if applicable. However, a high value of kurtosis shows the presence
of thicker tails and a leptokurtic distribution. The high
Findings value of Jarque-Bera or JB statistics is an indication that
Table 1 and 2 gives an account of the descriptive statistics the data of all five stock exchanges do not follow normal
for the daily and monthly index returns respectively. The distribution.
Table 1 Descriptive Statistic of daily return series

Particulars NIFTY HSI S&P ASX SSEC CHINA STI

Mean 0.000218 -6.59E-05 2.35E-06 -3.34E-05 3.44E-05
Median 0.000785 0.000281 0.000473 0.000332 0.000155
Maximum 0.092116 0.088078 0.068800 0.062601 0.064918
Minimum -0.151245 -0.065737 -0.115745 -0.092486 -0.083319
Std. Dev. 0.013066 0.012853 0.012870 0.013409 0.009521
Skewness -0.748791 -0.010049 -0.796918 -0.874069 -0.370925
Kurtosis 12.82573 6.120757 10.23850 9.069629 8.862353
Jarque-Bera 13974.36 1372.868 7954.308 5550.584 5042.672
Probability 0.000000 0.000000 0.000000 0.000000 0.000000
Sum 0.738843 -0.222815 0.008150 -0.111534 0.119058
Sum Sq. Dev. 0.579469 0.558698 0.575429 0.600194 0.314069
Observations 3395 3383 3475 3339 3466

The monthly index return of NIFTY, STI, and S&P AUX an absence of normal distribution. The proximity to
is near zero but HSI and SSEC are showing negative leptokurtic distribution is connected to the high value
returns. The high value of standard deviation shows of skewness. The JB statistics also indicate that the
the presence of clustering around the mean and less monthly data of all five stock exchanges shows a clear
dispersion. The negative skewness value indicates departure from normality.
Table 2 Descriptive Statistic of monthly return series

Particulars NIFTY HSI S&P ASX SSEC CHINA STI

Mean 0.004678 -0.001029 0.000370 -0.000360 0.000827
Median 0.005229 0.003560 0.003469 -2.90E-06 0.001934
Maximum 0.185698 0.241081 0.156647 0.177061 0.164562
Minimum -0.302433 -0.159183 -0.297209 -0.269533 -0.213869
Std. Dev. 0.064350 0.057742 0.062688 0.062324 0.051692
Skewness -0.528614 -0.022341 -0.846534 -0.272491 -0.460111
Kurtosis 5.644446 4.506360 5.912908 5.033968 4.817563
Jarque-Bera 55.76192 15.61393 78.04164 30.48397 28.53363
Probability 0.000000 0.000407 0.000000 0.000000 0.000001
Sum 0.771947 -0.169781 0.061050 -0.059367 0.136480
Sum Sq. Dev. 0.679110 0.546806 0.644493 0.637021 0.438213
Observations 165 165 165 165 165

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The ADF1 test was run to confirm the non-stationarity of return series. Table 3 and Table 4 contains the results of
the ADF tests of stationarity.

Table 3 Results of ADF Test of Daily Return Series

Test NSE HSI S&P ASX S1SEC STI

t-stats (Prob. Value) t-stats (Prob. Value) t-stats (Prob. Value) t-stats (Prob. Value) t-stats (Prob. Value)
ADF -56.247(.0000) -57.398(0.0000) -55.808(0.0000) -55.908(.0000) -37.486(.0000)

The prob. values of all indices given in Table 3 and Table 4 are less than 1%, indicating the rejection of the null
hypothesis. Hence, it is suitable for EGARCH modelling. EGARCH (p,q) modelling is an autoregressive process
where the dependent variable is dependent on its own previous values or lag term.

Table 4 Results of ADF Test of Monthly Return Series

Test NSE HSI S&P ASX SSEC STI

t-stats (Prob. Value) t-stats (Prob. Value) t-stats (Prob. Value) t-stats (Prob. Value) t-stats (Prob. Value)
ADF -13.69481 (0.0000) -13.97629 (0.0000) -14.08912 (.0000) -11.01368 (.0000) -14.23754 (.0000)

The next step is to check the autocorrelation among daily and monthly returns. Autoregressive processes usually
have an exponentially declining ACF and spikes in the first one or more lags of the PACF. The order of autoregression
depends on the number of spikes in ACF and PCAF.

Following figures shows graphical representation of the autocorrelation function (ACF) and partial autocorrelation
function (PACF) of daily returns.

Fig 1 NIFTY (ACF) Fig 4 HSI (PACF)

10
0
-10 1 2 3 4 5 6 7 8 9 10
1 2 3 4 5 6 7 8 9 10
PACF UL LL
ACF UL LL

Fig 2 NIFTY (PACF) Fig 5 S&P (ACF)

20 10
0 0
-20 1 2 3 4 5 6 7 8 9 10 -10 1 2 3 4 5 6 7 8 9 10

PACF UL LL ACF UL LL

Fig 3 HSI (ACF) Fig 6 S&P (PACF)

10 10
0 0
-10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 -10 1 2 3 4 5 6 7 8 9 10

ACF UL LL ACF UL LL

1
The hypothesis for ADF test is
H0: Unit root is present H1: Unit root is not present yt =c +βt + αyt–1+ ϕ1ΔYt–1+ ϕ2ΔYt–2...+ ϕpΔYt–p+et

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Fig 7 SSEC (ACF) Fig 9 STI (ACF)

20 20
0 0
-20 1 2 3 4 5 6 7 8 9 10 -20 1 2 3 4 5 6 7 8 9 10

ACF UL LL ACF UL LL

Fig 8 SSEC (PACF) Fig 10 STI (PACF)

20 20
0 0
-20 1 2 3 4 5 6 7 8 9 10 -20 1 2 3 4 5 6 7 8 9 10

PACF UL LL PACF UL LL

It is clear from figures 1 to 10 that for NIFTY, the prob. value becomes significant after lag 6; for Hong Kong, it
becomes significant at lag 23; for SSEC, it becomes significant from lag 6; for S&P ASX, it becomes significant from
lag 1, and for STI, it becomes significant from lag 11. The return equation for modelling EGARCH volatility terms is
set in accordance with the significant lag terms.

The findings for the day of the week effect in daily returns are presented in Table 5.
Table 5 Day of the week effect

Stock
NIFTY HSI S&P ASX SSEC STI
Market

Prob. Prob. Prob. Prob. Prob.

Variable Coeff. Coeff. Coeff. Coeff. Coeff.
Value value Value value value
C -0.00111 0.0264 -0.00085 0.0897 -0.00011 0.8171 -4.54E-0 0.9313 -0.00095 0.0091*
DTU 0.001903 0.0071* 0.001125 0.1105 0.000769 0.2697 0.000579 0.4326 0.001555 0.0025*
DW 0.001765 0.0126 0.001152 0.1009 0.000415 0.5502 0.000109 0.8824 0.001321 0.0098*
DTH 0.001110 0.1169 0.000556 0.4279 0.000129 0.8530 -0.00116 0.1133 0.001042 0.0414
DF 0.001871 0.0085* 0.001077 0.1271 -0.00074 0.2889 0.000548 0.4588 0.000988 0.0552

Note:* significant at 1%

The day-of-the-week effect examines if there exists any

significant difference between the returns generated by
one specific day of the week as opposed to rest of the
days.

Table 5 shows that in NIFTY, Tuesday and Friday have

positive and significant returns. STI has a negative but
significant return pattern on Monday, and positive
and significant returns on Tuesday and Wednesday.
Conversely, HSI, S&P ASX, and SSEC do not reflect
the presence of defined patterns in return generation,
indicating an absence of the day-of-the-week anomaly.

In the absence of hetreoskedasticity, the EGARCH

modelling is not advisable. Therefore, the ARCH LM
test was run on all five return series before fitting the
EGARCH model.

The ARCH LM test assumes the absence of the arch

effect. However, our results from the ARCH LM test

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supported the signs of heteroskedasticity in the daily return series only. Therefore, the EGARCH modelling was
applied on the daily data series to capture the volatility on day-of the-week. The absence of heteroskedascticity
makes it unfeasible to apply EGARCH on the monthly data series.

Table 6 Volatility and Day-of-the-week effect

Market NSE HSI S&P ASX SSEC STI

Variable Coeff Prob. Coeff Prob. Coeff Prob. Coeff Prob. Coeff Prob.
Value Value Value Value Value
C 4.53E-06 0.0242 3.48E-06 0.0008* 3.70E-06 0.0203 0.000156 0.0000* 6.03E-07 0.3970

DTU 7.46E-06 0.0047* 3.15E-06 0.0070* 9.78E-07 0.6391 2.63E-07 0.0147 3.06E-06 0.0009*

DW -9.32E-07 0.7239 1.79E-08 0.9877 -1.99E-06 0.3386 1.80E-08 0.8672 3.70E-07 0.6877

DTH -1.83E-06 0.4884 -1.37E-07 0.9063 -9.23E-07 0.6576 -1.41E-07 0.1884 7.58E-07 0.4094

DF 2.67E-06 0.3132 8.96E-07 0.4436 5.23E-07 0.8024 -2.07E-07 0.0545 5.99E-07 0.5178

GARCHt 0.962961 0.0000 0.972876 0.0000 0.978514 0.0000 0.055693 0.0013 0.981422 0.0000
(-1)

Table 6 shows if the daily market volatility has any significant impact on certain days of the week. The daily return
findings are supported by the daily volatility results. NIFTY and STI are facing significant volatility on Tuesday’s
return. For HSI and SSEC, the market volatility are going through significant impact on Monday but no significant
volatility in S&P ASX on any days of the week.

Table 7 Month-of-the-year Effect

Stock
NIFTY HSI S&P ASX SSEC STI
Market

Variable Coeff Prob. Coeff Prob. Coeff Prob. Coeff Prob. Coeff Prob.
Value Value Valve Value Value

C -0.014688 0.4022 -0.006431 0.6727 0.006676 0.6804 0.007411 0.5315 -0.004650 0.7197

FEB 0.028985 0.2430 -0.001446 0.9464 -0.012652 0.5811 -0.006516 0.7507 0.016669 0.3635

MAR 0.027194 0.2732 0.023518 0.2754 0.017515 0.4451 -0.008566 0.6762 0.030443 0.0980

APR 0.007160 0.7726 -0.022351 0.2998 -0.047348 0.0402 -0.019479 0.3428 -0.039110 0.0341

MAY 0.022668 0.3608 0.007450 0.7292 -0.012068 0.5986 -0.030503 0.1382 0.006941 0.7048

JUN 0.034015 0.1710 0.011398 0.5965 0.028683 0.2119 -0.110599 0.0913 0.030088 0.1020

JULY -0.001658 0.9466 -0.020879 0.3327 -0.029235 0.2032 -0.023393 0.2549 -0.035491 0.0541

AUG 0.026379 0.2878 -0.018708 0.3852 -0.037877 0.0999 -0.015509 0.4498 -0.006551 0.7207

SEP 0.034045 0.1706 0.016082 0.4553 0.018036 0.4317 0.004398 0.8301 0.017133 0.3503

OCT 0.008972 0.7223 0.023978 0.2751 -0.009790 0.6752 0.107645 0.0928 0.012795 0.4934

NOV 0.023135 0.3600 0.016939 0.4403 0.009239 0.6924 0.016348 0.4372 0.011693 0.5313

DEC 0.021158 0.4024 0.032961 0.1342 0.001226 0.9581 -0.013305 0.5270 0.023356 0.2120

Next, the study computes the month effect on the market returns. Table-7 shows the results of monthly returns and
if a month of the year has any significant impact on it. The findings presented in Table 7 depict clear absence of
month-effect in all the five markets. It confirms that no month is giving significant greater returns to the investors
as compared to rest of the months.

Conclusion
This study is an unprecedented attempt to explore the calendar anomaly and presence of volatility in the Asia-
Pacific region between the emerging and developed markets.

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The findings of the study affirm that the Indian stock 217(2), 351–356. https://doi.org/10.1016/j.
market gives positive and significant daily returns on ejor.2011.09.026
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stock market shows negative daily return on Monday  Chiah, M., & Zhong, A. (2021). Tuesday Blues
and positive and significant returns on Tuesday and and the day-of-the-week effect in stock returns.
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of volatility, the Indian, Hong Kong, and Singapore
 Frank. Cross (1973) The Behavior of Stock Prices on
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results were negative. The research finds no presence
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seasonal mood vary with work, sleep, and daylength
The study of Plastun et al. (2019) also supports that
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markets evolves over time and shifts from being
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inefficient to efficient in a manner where it is not possible
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The outcome of the study assert that for an emerging
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This study is relevant from the perspective of investment
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of the relevant policy decisions that can be taken to
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

Authors may be reached at

[email protected] and [email protected]

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