Anomaly or rationality: an empirical study on explaining the day-of-the-week effect for S&P CNX Nifty index in India
by K.N. Badhani, Naliniprava Tripathy
International Journal of Business and Emerging Markets (IJBEM), Vol. 2, No. 1, 2010

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.

Online publication date: Tue, 01-Dec-2009

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