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Seasonal Patterns in Indian Stock Markets: An Application of GARCH

(1, 1) Model
Shilpa Lodha1, Prof. G. Soral2
1
Guest Faculty, 2Professor,
1,2
Department of Accountancy & Statistics,
Mohanlal Sukhadia University,
Udaipur, Rajasthan, INDIA

I. Introduction
The stock market and ups and downs of index or stock prices always gain the attraction from several sides. It is
the matter of wonder how stock prices move and hence several attempts have been made by many researchers to
estimate or forecast the stock prices. There are many methods of forecasting stock prices. Traditionally
fundamental analysis and technical analysis were used for this purpose. Fundamental analysis is related with the
intrinsic value of the stock. It involves analysis of company’s financial statements, profitability, capital
structure, dividend policy, industry specific factors etc. Technical analysts advocates that all financial and
market information is already reflected in the stock prices. Therefore, prices can only be predicted with the
relative forces of demand and supply. Thus it is very much related to price and volume data. As time passed,
researchers evolved many more new analysis techniques, one of them being calendar anomalies or seasonality in
stock markets. Seasonality is based on the concept that History repeats itself. It states that it is possible to make
excess or abnormal returns using past prices’ data. There are chances of earning excess returns at a particular
time-of-the-day, day-of-the-week, week or part-of-the-month, month-of-the-year, quarter-of-the-year, before or
after holidays etc.
Kaeppel (2009) says “Although things do change over time, but they tend to return to a particular state over and
over again.” For our purpose the term seasonality may be used to indicate any seasonal trends or cyclic and
repetitive fluctuations existing in stock market. Thus seasonality in stock markets has very little to do with
natural seasons i.e. stocks of only those industries directly or indirectly related to agricultural products are
having some connection with natural seasons. Apart these most stocks are affected by different other non-
natural seasons for example month-of-the-year season, day-of-the-week season, time of the day season, holiday
season, election cycle season, budget season, tax year end season etc. Each of the seasons is famous by other
adage such as The January Barometer, Sell in May and Go Away, Black Monday or Black Friday, November
effect etc.
Therefore, the present study proposes to explore existence and if existing, identify patterns of seasonality in
Indian stock market.
II. Review of available literature
Before proceeding towards data collection and analysis, a lot of earlier researches were reviewed and it was
found that seasonal behaviour of stock market has been studied using both non-parametric and econometric
techniques, but it was opined that econometric techniques can better study the seasonal behaviour as these
techniques are capable enough to handle problems like serial correlation and heteroskedasticity. Review of work
already done was classified on the basis of their objectives and findings as is presented in table 1.
It is concluded from Table 1 that most of the previous studies have focused on international markets and a very
few have been undertaken considering Indian stock markets. Most of the studies have used only closing prices
as if trading is done only at closing prices. Instead in the present study, average of daily open, low, high and
close prices have been used. Further, prior Indian studies had either SENSEX or Nifty as their samples and
sectoral indices were generally ignored. Therefore it was decided to take BSE indices including sectoral indices
as representative sample of the present study.
III. Research methodology
For the present study following research methodology has been adopted:

IV. Objectives
The study is proposed with the objective of exploring the following effects in the Indian stock market:
 Day-of-the-week Effect
 Month-of-the-year Effect

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 Monthly Effect
 Quarterly Effect

Table 1: Summary of Review of Literature

Researchers Scope Objective Confirmation Rejection
Arumugam & 1. Day-of-the-week effect Both Effects
BSE & NSE --
Soundararajan (2013) 2. Month-of-the-year effect
1. Day-of-the-week effect Both Effects
Pathak (2013) NSE --
2. Month-of-the-year effect
1. Day-of-the-week effect
Nairobi Stock
Kuria & Riro (2013) 2. Month-of-the-year effect All Effects --
Exchange
3. Weekend Effect
Shakila, Prakash & Wednesday – Auto
NSE Day-of-the-week Effect --
Babitha (2013) Sector
Ray (2012) BSE Month-of-the-year Effect January Effect --
Dash, Dutta & Sabharwal March, November,
BSE Month-of-the-year Effect --
(2011) August and March
Nageshwari & Selvam 1. Day-of-the-week effect
BSE Weak Form Efficiency --
(2011) 2. Month-of-the-year effect
1. Day-of –the-Effect
Greek Equity 2. Month-of-year Effect
Rompotis (2009) Others Month-of-the-year Effect
Mutual Funds 3. Semi-month Effect
4. Holiday Effect
Shanghai and
Ogunc, Nippani & 1. Day-of-the-week Effect
Shenzhen stock Both Effect in Shanghai Others
Washer (2009) 2. January Effect
markets
African Stock 1. Month-of-the-year Effect
Algidede (2008) Both Effects --
Returns 2. Holiday Effect
Lean, Smyth & Wong 1. Day-of-the-week Effect Weekday and Monthly
Asian Markets January Effect
(2007) 2. January Effect Seasonality
1. Day-of-the-week Effect
Shanghai Stock Day-of-the-week Effect, January Effect & Semi-
Guo & Wang (2007) 2. January Effect
Index March & July Effect month Effect
3. Semi-month Effect
Day-of-the-week – 5
countries
1. Day-of –the-Effect Month-of-the-year – 8
Yakub, Beal & Ten Asian Stock 2. Month-of-year Effect countries
--
Delpachitra (2005) Markets 3. Semi-month Effect Monthly Effect – 6
4. Holiday Effect countries
Holiday Effect – 4
countries
Holiday Effect, turn-of-the-
Nepalese Stock month, Time-of-the-month,
Joshi & Bahadur (2005) Several Effects Day-of-the-week Effect
Market Month-of-the-year Effect
& Half-Month Effect

Shanghai & 1. Day-of-the-week Effect

Gao & Kling (2005) Friday Effect Year-end Effect
Shenzhen 2. Month-of-year Effect
Gold Index of 1. Weekend Effect
Coutts & Sheikh (2002) Johannesburg stock 2. January Effect -- All Effects
Exchange 3. Holiday Effect
Bhattacharya, Sarkar & Thursday & Friday
NSE Day-of-the-week Effect --
Mukhopadhyay (2003) Effect
Pandey (2002) BSE Month-of-the-year Effect
Bhabra, Dhillon &
BSE Month-of-the-year Effect November Effect --
Remirez (1999)
Day-of-the-week – all 4
Month-of-the-year – 2
BSE and stock indices
Chan, Khanthavit & Exchanges of Kuala Chinese New Year
Several Effects --
Thomas (1996) Lumpur, Singapore Effect – 2 indices
and Thailand Holiday Effect – BSE
Islamic New Year Effect
- KLSE
Turn of the week, Turn
Lakonishok & Smidt Dow Jones
Several Effects of the month, Turn of the --
(1988) Industrial Average
Year and Holiday Effects

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2015, pp. 33-43

V. Hypotheses
Accordingly, following hypotheses were formulated:
H01: Returns for all weekdays are equal.
H02: Returns for all months are equal.
H03: Returns for both halves of the month are equal.
H04: Returns for all quarters are equal.
VI. Data Collection
For studying the seasonal behaviour of stock prices, BSE was chosen as sample and its indices were included in
the study namely SENSEX, BSE -100, 200, 500, Midcap, Smlcap, Auto, Bankex, CD, CG, FMCG, HC, IT,
Metal, Oilgas, Power, PSU, Realty. Majority of prior researchers have used only closing prices as if trading is
done only at closing price. Rather average of these four prices can yield better results as it can control volatility
up to some extent. Therefore, daily close, open, high and low prices were collected for all indices from their
respective date of launching (or from the date when these four prices’ data were available) to 31 st May, 2013.
Thus very recent data have been collected. All these data have been collected from the official website of BSE
i.e. www.bseindia.com.
VII. Tools and Techniques
Following tools and techniques were used in the study:
 Stationarity: Graphical analysis, Correlogram and ADF Unit Root Test
 Serial Correlation:
o Detection: Serial Correlation LM Test
o Removal: ARIMA Modeling (Auto Regressive Integrated Moving Average)
 Heteroskedasticity:
o Detection: ARCH-LM Test
o Removal: GARCH (1, 1) Model
IX. Software
Data preparation was done in MS-Excel while econometric analysis were performed in Eviews 7.0.
X. Stationary Analysis
First of all average prices were plotted on the line graph which showed a continuously changing patterns of the
prices (a sample has been shown for SENSEX in Figure 1). It gives a clue of non-stationarity. Then a
correlogram of the original average series for all indices was obtained (as sample Correlogram for SENSEX has
been shown in Table 2). It was observed from the correlogram that ACF did not declined even after increasing
the lag length showing non stationarity in the series. Next, Augmented Dickey-Fuller test was applied to
formally confirm the non-stationarity. The results of the test have been presented in Table 4. As it is clear that
all the test statistics are more than their critical values, the null hypothesis of stationarity is rejected. After
confirming non-stationarity, log differences of the all the series have been calculated using the following
formula:
r = [ ln ( Yt) – ln ( Yt-1 ) ] * 100
Where r is return, ln is natural log, Y t is absolute value of Y at time period t and Yt-1 is absolute value of Y at
time period t-1. After calculating returns, all the three tests were again applied. Graph of return series is
presented in Figure 2 which is showing mean reversion of the series. Correlogram as shown in Table 3 shows
that ACF immediately declines as soon as the lag length is increased. Further, test statistic of unit root ADF test
also confirms stationarity of the return series.
AVERAGE
24,000

20,000

16,000

12,000

8,000

4,000

0
92 94 96 98 00 02 04 06 08 10 12
Figure 1: SENSEX average series

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2015, pp. 33-43

RETURN
20

15

10

-5

-10

-15
92 94 96 98 00 02 04 06 08 10 12

Figure 2: SENSEX return series

Table 2: Correlogram of SENSEX original series

Autocorrelatio Partial
n Correlation AC PAC Q-Stat Prob

|******* |******* 1 0.999 0.999 5261.1 0

|******* *| | 2 0.998 -0.089 10514 0
|******* | | 3 0.998 0.01 15759 0
|******* | | 4 0.997 -0.003 20995 0
|******* | | 5 0.996 0.016 26224 0
|******* | | 6 0.995 0.016 31445 0
|******* | | 7 0.994 0.007 36658 0
|******* | | 8 0.993 -0.014 41864 0
|******* | | 9 0.992 0 47062 0
|******* | | 10 0.992 -0.012 52252 0
|******* | | 11 0.991 -0.007 57435 0
|******* | | 12 0.99 0.006 62609 0
|******* | | 13 0.989 -0.002 67775 0
|******* | | 14 0.988 -0.015 72933 0
|******* | | 15 0.987 -0.018 78083 0
|******* | | 16 0.986 -0.01 83224 0
|******* | | 17 0.985 -0.004 88357 0
|******* | | 18 0.985 -0.011 93480 0
|******* | | 19 0.984 0.002 98595 0
|******* | | 20 0.983 0.009 103701 0
|******* | | 21 0.982 0.014 108799 0
|******* | | 22 0.981 0.019 113889 0
|******* | | 23 0.98 0.011 118971 0
|******* | | 24 0.979 0.005 124045 0
|******* | | 25 0.978 0.001 129111 0
|******* | | 26 0.978 -0.01 134170 0
|******* | | 27 0.977 0.003 139221 0
|******* | | 28 0.976 0.007 144264 0
|******* | | 29 0.975 0 149299 0
|******* | | 30 0.974 0.003 154327 0
|******* | | 31 0.973 0.001 159347 0
|******* | | 32 0.972 -0.002 164360 0
|******* | | 33 0.972 0.001 169364 0
|******* | | 34 0.971 -0.008 174362 0
|******* | | 35 0.97 -0.007 179351 0
|******* | | 36 0.969 0.003 184333 0

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Table 3: Correlogram of SENSEX return series

Autocorrelatio Partial
n Correlation AC PAC Q-Stat Prob

|** | |** | 1 0.237 0.237 294.84 0

| | *| | 2 -0.007 -0.067 295.11 0
| | | | 3 0.011 0.03 295.75 0
| | | | 4 -0.021 -0.034 298.19 0
| | | | 5 0 0.015 298.19 0
| | | | 6 -0.035 -0.044 304.69 0
| | | | 7 0.006 0.029 304.89 0
| | | | 8 0.025 0.013 308.11 0
| | | | 9 0.042 0.039 317.5 0
| | | | 10 0.035 0.014 323.82 0
| | | | 11 0.013 0.006 324.78 0
| | | | 12 -0.008 -0.014 325.13 0
| | | | 13 0.013 0.023 326.08 0
| | | | 14 0.046 0.04 337.29 0
| | | | 15 0.018 0.002 339.09 0
| | | | 16 0.009 0.008 339.56 0
| | | | 17 0.028 0.024 343.67 0
| | | | 18 0.018 0.004 345.33 0
| | *| | 19 -0.057 -0.066 362.44 0
| | | | 20 -0.014 0.021 363.41 0
| | | | 21 -0.008 -0.016 363.76 0
| | | | 22 -0.007 0 364.04 0
| | | | 23 0.027 0.023 367.83 0
| | | | 24 -0.002 -0.016 367.85 0
| | | | 25 0.005 0.004 367.97 0
| | | | 26 0.019 0.016 369.83 0
| | | | 27 0.009 0.001 370.23 0
| | | | 28 -0.016 -0.019 371.66 0
| | | | 29 -0.036 -0.024 378.65 0
| | | | 30 -0.037 -0.025 385.98 0
| | | | 31 0.007 0.019 386.27 0
| | | | 32 0 -0.01 386.27 0
| | | | 33 -0.013 -0.006 387.19 0
| | | | 34 -0.001 0 387.19 0
| | | | 35 0.002 0.001 387.21 0
| | | | 36 -0.008 -0.01 387.53 0

Table 4: Results of ADF test* for SENSEX average and return series
t-Value t-Value
(Average Series) (Return Series)
Index
Intercept Intercept None Intercept Intercept None
and Trend and Trend

BSE – SENSEX -0.241090 -1.851828 1.172827 -47.90864 -47.91166 -47.84160

BSE – 100 -0.225216 -1.996622 1.096492 -37.63474 -37.63630 -37.56367

BSE – 200 -0.218316 -1.974808 1.087428 -32.49077 -32.48674 -32.43871

BSE – 500 -0.658653 -2.403238 0.902569 -29.25863 -29.25426 -29.21164

BSE Midcap -1.857542 -2.056482 0.474135 -20.16070 -20.17090 -20.14191

BSE Smlcap -2.004090 -1.875832 0.079462 -18.61031 -18.63031 -18.60122

BSE – Auto 0.745568 -1.700741 2.176261 -28.10364 -28.09967 -28.01293

BSE – Bankex -0.702200 -3.074372 0.953509 -24.09895 -24.11740 -24.00322

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BSE CD 0.214539 -1.856027 1.461799 -26.53736 -26.56512 -26.51139

BSE CG -1.141784 -1.823554 -0.081033 -28.96818 -28.96617 -28.90720

BSE FMCG 2.371943 -0.105913 3.601449 -30.23512 -30.29857 -30.16232

BSE HC 2.371943 -0.105913 3.601449 -36.13461 -36.17346 -36.09308

BSE IT 0.992252 -1.266829 0.131478 -27.85299 -27.86597 -27.85583

BSE Metal -1.416079 -2.154054 -0.241310 -28.35182 -28.37517 -28.34389

BSE Oilgas -1.123589 -2.344154 0.169624 -29.74873 -29.80523 -29.71209

BSE Power -2.041864 -1.746478 -0.255363 -40.15401 -40.20564 -40.15182

BSE PSU -1.242421 -2.424183 0.232919 -26.50933 -26.56723 -26.44234

BSE Realty -1.534859 -2.591976 -0.730172 -35.51307 -35.56084 -35.52138

*Critical values of ADF test at 5% level of significance are -2.861890, -3.410652 and -1.940884 for intercept,
intercept & trend and none respectively.
XI. Dummy variable regression model
For the study of Day-of-the-Week effect, month-of-the-year effect, quarterly effect and monthly effect four
regression equations were formed including a constant term as Monday, January, First Quarter and First-half of
the month respectively. For remaining days, months etc. dummy variables were included in the equation.
Day-of-the-week
Yt = α1 + α2DTue + α3DWed + α4DThu + α5DFri + ε1 Equation 1
Month-of-the-year
Yt = α1 + α2DFeb + α3DMar + α4DApr + α5DMay + α6DJun + α7DJul + α8DAug + α9DSep +
α10DOct + α11DNov + α12DDec + ε1 Equation 2
Quarterly Effects
Yt = α1 + α2DII + α3DIII + α4DIV + ε1 Equation 3
Monthly Effects
Yt = α1 + α2DII + ε1 Equation 4
ε1 is the white noise error term.
XII. Results and discussion
To begin with, all the four equations were estimated for all BSE indices and results were not much exciting as
far as seasonality is concerned. There were little signs of calendar anomalies for a few indices. Other statistics
were very discouraging as the Adjusted R-squared and F- Statistic were not up to the mark, which indicated
poor fit of the model. The D-W statistic was also less than 2 for all the indices, which indicated serial correlation
in the return series. L-M test also confirmed this fact. To overcome this problem, proper ARMA terms were
added in the equation using Box-Jenkins Methodology and then the equation was estimated again for all the
indices. This time results got changed from those which were received earlier. The D-W statistic now became
very close to 2 and favorable results of LM-test, applied after inclusion of ARMA terms, confirmed the removal
of serial correlation. AIC and SBC statistics also got improved from the previous estimates.
Next, for checking existence of heteroskedasticity, ARCH-LM test was applied on the regression results
obtained after inclusion of ARMA terms. The significant test statistic confirmed the existence of
heteroskedasticity in all the indices of BSE. Therefore, GARCH (p, q) model with appropriate values of p and q
was estimated. ARCH-LM test was again applied on results generated by GARCH model and it was confirmed
that heteroskedasticity has been removed. Tables 5 to 8 present the estimation results of GARCH model for BSE
indices for different effects. The coefficients of different months have been presented with their respective z-
value in parenthesis. Significance of coefficients at 1%, 5% and 10% level has been indicated by *, ** and ***
respectively.
A. Day-of-the-week effect
Table 5 shows the results of GARCH (p, q) model for day-of-the-week effect. Surprisingly, similar to SENSEX,
Monday has been emerged to be significant for all indices of BSE except for BSE Power and Realty. Returns
for Monday are significant at 1% level of significance with the exception of being significant for FMCG and
Oilgas at 5% level and for IT and Metal at 10% level. Returns for Tuesday are significant only for 5 indices;
those for Wednesday are significant for 3 indices, for Thursday are significant for 4 indices and for Friday are
significant for 3 indices. With regard to sectoral indices, most of the indices are having the day-of-the-week
effect on Monday, only BSE CD (Consumer Durables) and CG (Capital Goods) are showing significant returns

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on days other than Monday. Whereas other indices are having Tuesday and Thursday also as significant returns
generating days.
B. Month-of-the-year effect
Table 6 contains the results of GARCH (p, q) model for month-of-the-year effect and shows that there is major
transition in results, once heteroskedasticity is taken care of. SENSEX is displaying significant results in June,
September, November and December. Apart this, 12 out of 18 indices of BSE are showing significant returns in
September. BSE Realty did not show significant returns in any of the months. April effect is observable for only
two indices i.e. BSE CD and IT. Returns for February, March, July and October are not significant for any of the
indices. May effect is also not apparent in BSE indices as it is found to be significant only for BSE CD, CG and
HC and surprisingly, January effect was found only in case of BSE PSU.
Table 5: Results of GARCH model in BSE indices return series for day-of-the-week effect
Indices
BSE BSE BSE
Variables SENSEX BSE 100 BSE 200 BSE 500 BSE Auto BSE CD
Midcap Smlcap Bankex
0.138 0.157 0.229 0.202 0.197 0.166 0.161 0.193 0.247
C
(4.899)* (5.655)* (7.632)* (6.049)* (4.522)* (3.520)* (3.200)* (3.596)* (5.314)*
-0.0943 -0.104
-0.117 -0.129 -0.074 -0.041 -0.097 -0.041 -0.133
Tuesday (- (-
(-3.028)* (-3.026)* (-1.512) (-0.858) (-1.560) (-0.593) (-2.492)**
2.495)** 2.436)**
-0.085
-0.0244 -0.062 -0.058 -0.061 -0.039 -0.050 -0.038 -0.157
Wednesday (-
(-0.575) (-1.512) (-1.215) (-1.100) (-0.734) (-0.727) (-0.491) (-2.429)**
1.906)***
-0.082
-0.0514 -0.136 -0.082 -0.086 -0.046 -0.033 -0.041 -0.131
Thursday (-
(-1.243) (-3.110)* (-1.742) (-1.617) (-0.923) (-0.468) (-0.609) (-2.010)**
2.068)**
-0.094
-0.0112 -0.031 -0.104 -0.053 -0.064 -0.018 -0.051 -0.213
Friday (-
(-0.325) (-0.929) (-2.846)* (-1.418) (-1.667) (-0.330) (-0.798) (-4.350)*
2.356)**
Adj. R2 0.054473 0.078999 0.092983 0.096748 0.192032 0.291086 0.146389 0.117145 0.190662
AIC 3.263883 3.205853 3.115663 3.016866 2.792551 2.78441 3.069747 3.559979 3.346802
SIC 3.277386 3.219355 3.134119 3.040133 2.825978 2.820668 3.098542 3.588263 3.374342
Table 5 Contd.
Indices
Variables BSE BSE BSE BSE
BSE CG BSE HC BSE IT BSE PSU BSE Realty
FMCG Metal Oilgas Power
0.263 0.068 0.138 0.114 0.114 0.124 -0.013 0.138 -0.018
C
(5.298)* (2.165)** (4.913)* (1.898)*** (1.816)*** (2.569)** (-0.228) (3.694)* (-0.171)
-0.229 -0.002 -0.444 0.002 -0.041 -0.043 0.024 -0.064 0.081
Tuesday
(-3.524)* (-0.062) (-0.298) (0.034) (-0.510) (-0.691) (0.333) (-1.349) (0.659)
-0.176
0.026 -0.011 0.060 0.003 -0.024 0.092 -0.047 0.170
Wednesday (-
(0.565) (-0.277) (0.683) (0.038) (-0.333) (1.183) (-0.849) (1.249)
2.298)**
-0.16
0.012 -0.444 -0.001 -0.075 -0.061 -0.067 -0.091 0.011
Thursday (-
(0.257) (-1.088) (-0.010) (-0.857) (-0.899) (-0.867) (-1.619) (0.084)
2.185)**
-0.078
-0.073 -0.0002 -0.048 -0.079 -0.052 -0.060 -0.028 -0.054
Friday (-
(-1.234) (-0.007) (-0.788) (-1.100) (-0.970) (-0.934) (-0.693) (-0.486)
2.460)**
Adj. R2 0.055349 0.110712 0.082904 0.101917 0.116590 0.085267 0.069861 0.145122 0.113639
AIC 3.606070 2.762440 2.614313 3.836726 3.716085 3.210416 3.230276 3.074931 4.318741

SIC 3.622577 2.786296 2.634493 3.856907 3.744890 3.236593 3.272234 3.097090 4.358680

Table 6: Results of GARCH model in BSE indices return series for month-of-the-year effect
Indices
Variables
BSE SENSEX BSE 100 BSE 200 BSE 500 BSE Midcap BSE Smlcap
0.013361 0.032296 0.059698 0.091129 0.090311 0.108202
January (C)
(0.249224) (0.580825) (1.012631) (1.391073) (0.916245) (1.007286)

0.070395 0.008415 0.057471 -0.057824 -0.100538 -0.184085

February
(0.950733) (0.111267) (0.694793) (-0.643001) (-0.689998) (-1.212401)
0.013899 -0.000723 0.042627 -0.018565 0.081075 -0.072388
March
(0.169545) (-0.008717) (0.468059) (-0.198326) (0.567750) (-0.481328)
0.013037 0.021016 -0.000314 -0.029527 0.113529 0.086252
April
(0.156138) (0.244208) (-0.00340) (-0.315802) (0.807277) (0.588501)

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0.087989 0.069223 0.067346 0.108887 -0.004655 -0.098413

May
(1.127306) (0.845716) (0.729063) (1.152332) (-0.033319) (-0.640460)
0.198010 0.152083 0.154343 0.103640 0.026179 0.022119
June
(2.29522)** (1.6874)*** (1.541277) (0.983892) (0.175355) (0.131535)
0.064787 0.043271 0.024921 -0.000485 0.094235 0.098722
July
(0.809270) (0.533201) (0.281756) (-0.005131) (0.673231) (0.614443)
0.089445 0.075157 0.039125 0.053498 0.021260 0.007404
August
(1.039961) (0.874865) (0.427319) (0.539734) (0.152258) (0.046134)
0.229977 0.194833 0.288897 0.257124 0.235933 0.157551
September
(2.977855)* (2.4563)** (3.47391)* (2.725162)* (1.6841)*** (1.015967)
-0.032945 -0.059901 -0.040808 -0.046888 -0.061208 -0.091651
October
(-0.397799) (-0.705993) (-0.45307) (-0.491951) (-0.474335) (-0.647880)
0.151806 0.127377 0.143721 0.193025 0.044706 -0.017295
November
(1.8584)*** (1.505201) (1.491014) (1.92029)*** (0.322724) (-0.118134)
0.153954 0.141801 0.168021 0.170367 0.104806 0.109256
December
(1.8835)*** (1.73821)*** (2.0014)** (1.882735)*** (0.649826) (0.689464)
Adj. R2 0.051682 0.075873 0.088165 0.091673 0.190611 0.288276

AIC 3.264441 3.207530 3.117894 3.016182 2.795932 2.789660

SIC 3.286536 3.229625 3.147116 3.051977 2.848879 2.845395

Table 6 Contd.
Indices
Variables
BSE Auto BSE Bankex BSE CD BSE CG BSE FMCG BSE HC
-0.039247 0.079097 -0.076665 0.021357 -0.031944 -0.012907
January (C)
(-0.412543) (0.815068) (-0.78628) (0.222230) (-0.524452) (-0.202944)
0.076782 -0.164631 0.098475 0.104389 0.021347 0.032578
February
(0.543916) (-1.179086) (0.76451) (0.767604) (0.232313) (0.373454)
0.100697 0.064637 0.037305 -0.088049 0.098935 0.125138
March
(0.700926) (0.407395) (0.26455) (-0.603592) (1.128065) (1.417906)
0.167254 -0.008125 0.264383 0.167078 0.131474 0.138327
April
(1.160681) (-0.053003) (1.8039)*** (1.147809) (1.342627) (1.586185)
0.030710 -0.033937 0.345312 0.358046 0.107135 0.205146
May
(0.237586) (-0.214174) (2.4345)** (2.682258)* (1.222569) (2.51691)**
0.072233 0.081461 0.236348 0.240996 0.204457 0.091560
June
(0.467669) (0.476111) (1.50929) (1.64935)*** (2.0000)** (0.942870)
0.135800 0.185328 0.114532 0.089191 0.124767 0.034053
July
(0.960337) (1.207944) (0.76852) (0.610621) (1.288173) (0.406652)
0.246676 -0.073507 0.246524 0.123870 0.137642 0.109894
August
(1.7298)*** (-0.486342) (1.672)*** (0.831802) (1.451798) (1.187222)
0.433771 0.495533 0.208002 0.189099 0.163953 0.215543
September
(3.162620)* (3.522732)* (1.400032) (1.359717) (1.8800)*** (2.4651)**
0.032270 -0.071010 0.170026 0.081963 -0.002415 0.039179
October
(0.242632) (-0.465498) (1.244938) (0.600148) (-0.025029) (0.443191)
0.261648 0.269448 0.501257 0.486690 0.173425 0.221460
November
(1.7229)*** (1.7303)*** (3.5621)* (4.060358)* (1.7786)*** (2.37868)**
0.245719 0.104444 0.245126 0.215880 0.150160 0.207032
December
(1.7236)*** (0.656807) (1.754)*** (1.443839) (1.605935) (2.25906)**
Adj. R2 0.145275 0.116936 0.188108 0.044672 0.111530 0.080314

AIC 3.069952 3.555512 3.352726 3.435060 2.762645 2.615498

SIC 3.117070 3.600295 3.393117 3.468082 2.799337 2.648521

Table 6 Contd.
Indices
Variables
BSE IT BSE Metal BSE Oilgas BSE Power BSE PSU BSE Realty
0.042604 0.046674 0.055188 -0.140866 0.137123 0.118623
January (C)
(0.526239) (0.409750) (0.52754) (-1.491718) (1.872)*** (0.563523)
0.087835 -0.179268 -0.095002 -0.050710 -0.128233 -0.304187
February
(0.646553) (-0.996408) (-0.65473) (-0.296564) (-1.15714) (-0.95563)
-0.016307 0.082141 0.043939 0.160791 -0.126868 -0.200956
March
(-0.12396) (0.455476) (0.29826) (0.969735) (-1.14747) (-0.65809)

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-0.519617 0.000436 0.007912 0.230255 -0.051752 0.077253

April
(-4.2139)* (0.002496) (0.05205) (1.461142) (-0.47107) (0.23196)
-0.046269 -0.080308 -0.003152 -0.064193 -0.032955 -0.367744
May
(-0.35396) (-0.451748) (-0.02192) (-0.474441) (-0.30211) (-1.21306)
0.097214 -0.068761 0.095009 0.283719 -0.007572 -0.265629
June
(0.652849) (-0.358611) (0.54092) (1.598939) (-0.06549) (-0.80118)
-0.057159 0.065241 -0.083249 0.130511 -0.094808 -0.020437
July
(-0.41045) (0.369480) (-0.54467) (0.868509) (-0.85819) (-0.06947)
0.149278 -0.098533 0.049117 0.009369 -0.151032 -0.309565
August
(0.997817) (-0.543123) (0.33296) (0.058165) (-1.34301) (-0.99491)
0.189648 0.372783 0.255547 0.358170 0.149360 0.492272
September
(1.393365) (2.210535)** (1.841)*** (2.43178)** (1.327170) (1.582672)
0.066913 -0.145534 -0.035443 0.039499 -0.149451 -0.211866
October
(0.492360) (-0.845561) (-0.23754) (0.256813) (-1.36714) (-0.71602)
0.174778 0.021349 -0.037759 -0.011924 0.003627 -0.193125
November
(1.163203) (0.114830) (-0.25314) (-0.076793) (0.031175) (-0.62343)
0.211981 0.306380 0.114383 0.281157 0.095360 0.091611
December
(1.479415) (1.66351)*** (0.75635) (1.73162)*** (0.840434) (0.258937)

Adj. R2 0.100917 0.113963 0.083884 0.063383 0.142102 0.109237

AIC 3.813789 3.715684 3.210876 3.235489 3.076146 4.321640

SIC 3.852315 3.762820 3.255360 3.311776 3.112406 4.386994

C. Quarterly effects
For quarterly effects, the estimation results of GARCH(p, q) model have been presented in Table 7. It is
confirmed from Table 7 that SENSEX, BSE 100, 200, 500, Midcap, CD, CG, FMCG and HC have significant
returns at 1% level of significance whereas BSE PSU and Smlcap have those at 5% and 10% level of
significance respectively during the first quarter. The third quarter is significant only for BSE IT. The second
quarter has significant returns in case of BSE Auto, Bankex and IT whereas fourth quarter is significant for
SENSEX, BSE 100, CG, CD and FMCG. Thus, first quarter’s returns are found significant in case of BSE
indices as it is confirmed in case of 11 out of 18 indices of BSE.

Table 7: Results of GARCH model in BSE indices return series for quarterly effects
Indices
BSE BSE BSE BSE
Variables BSE 100 BSE 200 BSE 500 BSE Auto BSE CD
SENSEX Midcap Smlcap Bankex

0.119952 0.119927 0.141766 0.163281 0.132668 0.111418 0.054170 0.097685 0.206607

Quarter I (C)
(3.172675)* (3.073823)* (3.16803)* (3.234486)* (2.146476)* (1.6469)*** (0.869153) (1.327174) (3.15805)*
0.016895 0.013568 0.026475 0.023744 0.077592 0.092447 0.193587x 0.187353 -0.089750
Quarter II
(0.333528) (0.262443) (0.458976) (0.380499) (0.916728) (0.966532) (2.2054)** (1.878)*** (-0.96575)
-0.016980 -0.024152 0.008866 0.032765 -0.018727 -0.010810 0.085430 0.068542 0.017787
Quarter III
(-0.320509) (-0.442506) (0.145701) (0.514072) (-0.217911) (-0.116331) (0.958384) (0.656981) (0.201525)
-0.080785 -0.085776 -0.053521 -0.091231 -0.039408 -0.082600 -0.035995 -0.043030 -0.240547
Quarter IV
(-1.653)*** (-1.69686)*** (-0.93842) (-1.533210) (-0.450772) (-0.879249) (-0.41147) (-0.44149) (-2.7087)*

Adj. R2 0.052465 0.076383 0.089795 0.093959 0.193041 0.290800 0.146806 0.118575 0.189407

AIC 3.264401 3.206940 3.118379 3.016356 2.791042 2.784468 3.066634 3.557005 3.350131

SIC 3.276676 3.219215 3.135297 3.037833 2.821696 2.817909 3.092810 3.582932 3.375834
Table 7 Contd.
Indices
Variables BSE BSE
BSE CG BSE FMCG BSE HC BSE IT BSE Metal BSE Oilgas BSE PSU
Power Realty
0.184665 0.115148 0.131334 -0.008465 -0.005256 0.086894 0.013719 0.108974 -0.067460
Quarter I (C)
(2.889421)* (2.724587)* (3.71640)* (-0.135956) (-0.061789) (1.289676) (0.177507) (2.2028)** (-0.47680)

-0.042833 -0.006848 -0.044925 0.152247 0.170548 0.045021 0.010228 -0.015806 0.231908

Quarter II
(-0.438230) (-0.118565) (-0.88711) (1.654248)*** (1.467177) (0.498125) (0.096115) (-0.22302) (1.201434)

0.114007 -0.030019 0.016622 0.209730 0.123133 -0.012609 -0.039272 0.002423 0.095660

Quarter III
(1.396937) (-0.491659) (0.318885) (2.289739)** (1.027478) (-0.135229) (-0.35483) (0.034037) (0.471005)

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-0.244263 -0.112419 -0.080972 0.077211 0.028481 -0.050437 -0.110295 -0.057818 0.020977

Quarter IV
(-2.69137)* (-1.961882)** (-1.56634) (0.897556) (0.246438) (-0.559198) (-1.03967) (-0.84162) (0.106310)
Adj. R2 0.057098 0.112463 0.081325 0.102226 0.115354 0.086209 0.068069 0.144975 0.112588

AIC 3.602183 2.759571 2.614773 3.813517 3.714813 3.207761 3.231884 3.075418 4.317928

SIC 3.618695 2.781586 2.633118 3.835532 3.741000 3.231311 3.270027 3.095562 4.354236

Table 8: Results of GARCH model in BSE indices return series for monthly effects
Indices
Variables BSE BSE BSE BSE
BSE 100 BSE 200 BSE 500 BSE Auto BSE CD
SENSEX Midcap Smlcap Bankex
0.146533 0.149307 0.192114 0.198483 0.224139 0.207783 0.167797 0.210874 0.173198
First-Half (C)
(6.11027)* (6.181348)* (7.09458)* (7.309795)* (5.20459)* (4.5904)* (3.90227)* (4.4196)* (4.2652)*

-0.087715 -0.098777 -0.105356 -0.101018 -0.159865 -0.175382 -0.090633 -0.101885 -0.097059

Second-Half
(-2.77943)* (-3.115165)* (-2.94917)* (-2.74204)* (-3.06558)* (-3.2139)* (-1.64290) (-1.6004) (-1.872)***

Adj. R2 0.053483 .078082 0.091658 0.095837 0.194755 0.292933 0.147496 0.118284 0.187807

AIC 3.263126 3.205329 3.115974 3.022347 2.780929 2.778540 3.067127 3.556871 3.351253

SIC 3.272946 3.215149 3.129816 3.040245 2.808797 2.806407 3.088068 3.578083 3.373285

Table 8 Contd.
Indices
Variable
BSE CG BSE FMCG BSE HC BSE IT BSE Metal BSE Oilgas BSE Power BSE PSU BSE Realty
0.170280 0.077386 0.148892 0.129308 0.119661 0.087879 0.036133 0.146857 0.192844
First-Half (C)
(3.79271)* (2.779814)* (6.13528)* (3.406453)* (2.13164)** (2.02056)** (0.682633) (0.0000)* (2.0175)**
-0.066995
-0.005644 -0.091341 -0.056991 -0.086105 -0.012499 -0.112032 -0.106503 -0.328873
Second-Half (-
(-0.154272) (-2.8761)* (-0.964126) (-1.176995) (0.8239) (-1.714819) (-2.3857)** (-2.7889)*
1.128379)

Adj. R2 0.056240 0.112928 0.081884 0.101920 0.117332 0.086578 0.069636 0.147210 0.115334

AIC 3.604724 2.758472 2.612671 3.833375 3.713655 3.208494 3.228041 3.072479 4.311406

SIC 3.617566 2.780499 2.627348 3.851721 3.734605 3.229443 3.262370 3.088595 4.340452

D. Monthly effects
Table 8 contains the estimation results of GARCH (p, q) model for monthly effects. It is quite evident from
Table 8 that all non-sectoral indices of BSE and BSE HC, PSU and Realty are having significant returns in both
halves of the month whereas all other sectoral indices are having returns of first-half as significant with the
exception of BSE Power which has significant returns in neither part of the month.
XIII. Conclusions
The present paper is an attempt to explore the existence of seasonality in Indian stock market. Four types of
seasonal effects namely day-of-the-week effect, month-of-the-year effect, quarterly effect and monthly effect
were explored and for this purpose daily close, open, high and low prices were collected from the date of
launching of a particular index to 31st May, 2013. All BSE indices were taken as sample. For analysis of stock
market data, techniques of time-series econometrics were used. Results confirmed the existence of all the four
calendar anomalies in BSE. After analyzing all the four calendar effects namely day-of-the-week effect, month-
of-the-year effect, quarterly effects and monthly effects, it was found that all the four effects are present in the
Indian stock market. Amongst all weekdays, Monday was found to be most significant day for most of the
indices of BSE. In case of month-of-the-year effect, September and December were providing significant
returns. First quarter was emerged as the most significant quarter, when quarterly effects were tested. In case of
monthly effects, returns of first-half of the month were found to be significant. Further, once ARMA terms for
ARIMA modeling, order of ARCH for heteroskedasticity and p and q terms for GARCH model have been
identified in analyzing day-of-the-week effect, in analyzing other calendar effects all these parameters were
either equal or very close to their first estimates in day-of-the-week effect. It implies that while using
econometric techniques, basis characteristics of the series remains the same no matter how data are grouped
(daily, monthly etc.)

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Shilpa Lodha et al., American International Journal of Research in Humanities, Arts and Social Sciences, 9(1), December 2014-February
2015, pp. 33-43

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