Seasonality and Market Crashes in Indian Stock Markets

Abstract

The presence of seasonal effects in monthly returns has been reported in several developed and emerging stock markets. The objective of this study is to explore the interplay between the month-of-the-year effect and market crash effects on monthly returns in Indian stock markets. The study uses dummy variable multiple linear regression to assess the seasonality of stock market returns and the impact of market crashes on the same. The results of the study provide evidence for a month-of-the-year effect in Indian stock markets, particularly positive November, August, and December effects, and a negative March effect. Further, the study suggests that the incidence of market crashes reduces the seasonal effects.

Impact Of Union Budget On Indian Stock Market

“…A November-December effect in which mean returns for November and December were significantly greater than those of the other ten months and a March-to-May effect in which mean returns for the months March to May are significantly less than those during the other nine months. Dash et al (2011) found that month-of-the-year effect in Indian stock markets is positive for November, August and December effects, and a negative March effect. The study also suggests that the incidence of market crashes reduces these seasonal effects.…”

Personalized Temporal Trading Functionalities Engaged in Calendar Market Anomalies: Empirical Evidences from the 2007 and 2009 Financial Crises

“…For example, Siriopoulos, and Giannopoulos [38], as well as Dash et al [32], introduce into the equations additional dummy variables for months where unusually large price changes are observed. This allows for direct isolation of the influence of these observations and for a separate analysis from the rest of the data.…”

“…This effect is most commonly observed during the last trading days or during the last week of the year, and is, therefore, often referred in the literature as "the turn-off-the-year effect". This anomaly has been identified on markets such as the Australian [31], the Indian [32], the ones in Belgium, Canada, Japan, Switzerland [9].…”

“…The following econometric models have been specified, based on the market indices of the Athens Stock Exchange (Athens) and the Bulgarian Stock Exchange (Sofia): The applied models are standard for the study of calendar effects. These models and their modifications have been used, for example, by [26,31,32] for the monthly calendar effects, and by Siriopoulos, and Giannopoulos [38] for the "Halloween effect".…”

Factors Affecting Seasonality in the Stock Market: A Social Network Analysis Approach

“…Market crashes were considered as a moderate influencing factor in the social network as it showed the out-degree of 19 and in-degree of 2.Accordingly, these factors can influence all other factors and can create an impact on the seasonality effect. Prior research such as Dash et al (2011) found that market crash reduces seasonality. Similarly, Varadhrajan and Vikkraman (2011) found that during the general financial crisis a sharp fall was witnessed in the market capitalization as well as on the indices.…”