Title: Can stock market time the FPIs: a study of seasonality

Authors: Parul Kumar; R.K. Sharma; Sunil Kumar; Deepali Ratra

Addresses: Maharaja Agrasen Institute of Management Studies, Plot No. 1, PSP Area, Sector-22, Rohini, Delhi – 110086, India ' Bharati Vidyapeeth Institute of Management & Research, A-4, Paschim Vihar, Rohtak Road, New Delhi – 110063, India ' School of Management Studies, Indira Gandhi National Open University, Maidan Garhi, New Delhi – 110068, India ' JaganNath Institute of Management Sciences, Community Centre, (Near Police Station), Sector-3, Rohini, Delhi – 110085, India

Abstract: The purpose of the paper is to analyse the presence of the days of the week effect, quarter effect, and month effect on the net investment of foreign portfolio investors (FPI) in India. For this purpose, research has been conducted for the time period from 4th January 2000 till 30th November 2016. FPI's daily net inflows have been analysed for occurrence and existence of month effect along with day of the week and quarter effect. Interaction effect between the quarter, month and nifty returns has been also analysed. Augmented dummy regression with ARIMA and GARCH has been used to analyse presence of seasonal anomalies in FPIs. Results confirmed the presence of calendar effect i.e., December month of the year (December) effect on the FPIs. Also, Friday effect and the Quarter 4 effect were present in the investing pattern of FPIs. Study concluded that FPIs were more biased towards trading more on Fridays and in the month of December in the overall analysis. Also, the presence of quarter effect was seemed to be caused by the presence of month effect along with the nifty returns of those specific months. Hence, there exists the strong interaction effect among the anomalies in the FPI net investment to India.

Keywords: ARIMA; GARCH; quarter effect; calendar effect; dummy regression; monthly effect; day effect; nifty; stock market; foreign portfolio investment; interaction effect.

DOI: 10.1504/IJTTC.2017.088729

International Journal of Technology Transfer and Commercialisation, 2017 Vol.15 No.3, pp.322 - 345

Received: 18 Apr 2017
Accepted: 11 Jul 2017
Published online: 15 Dec 2017 *

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