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Anomaly or rationality: an empirical study on explaining the day-of-the-week effect for S&P CNX Nifty index in India

Author

Listed:
  • K.N. Badhani
  • Naliniprava Tripathy

Abstract

This paper examines the behaviour of Nifty returns across the days-of-the-week during the different settlement regimes from 1995 to 2007. During the fixed-day weekly settlement system, inflated returns are observed on Wednesday, the first day of the settlement cycle. However, this Wednesday-effect vanishes when adjustment is made for the settlement-lag. The behaviour of market is rational rather than anomalous and it is appropriately adjusting the stock prices to cover the interest for the delay in settlement. Market follows the trading-period hypothesis in making such adjustments. After the implementation of the rolling settlement system, no day-of-the-week effect is found in returns.

Suggested Citation

  • K.N. Badhani & Naliniprava Tripathy, 2010. "Anomaly or rationality: an empirical study on explaining the day-of-the-week effect for S&P CNX Nifty index in India," International Journal of Business and Emerging Markets, Inderscience Enterprises Ltd, vol. 2(1), pages 23-42.
    • Handle: RePEc:ids:ijbema:v:2:y:2010:i:1:p:23-42
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