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An Analysis of turn of the month effect on S&P BSE Healthcare Index in the Indian Stock Market

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An Analysis of turn of the month effect on S&P BSE Healthcare Index in the Indian Stock Market


Dr. G. LalithaKumari | Uthra. V

https://doi.org/10.31142/ijtsrd8340



Dr. G. LalithaKumari | Uthra. V "An Analysis of turn of the month effect on S&P BSE Healthcare Index in the Indian Stock Market" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-2 | Issue-2, February 2018, pp.138-145, URL: https://www.ijtsrd.com/papers/ijtsrd8340.pdf

The presence of the seasonal or monthly effect in stock returns has been reported in several developed and emerging stock markets. The Efficient Market Hypothesis (EMH) suggests that asset prices reflect on all obtainable information (Fama,1970). However, many studies have accepted not only that stock prices are predictable based on the preceding information, but also that indicators such as dividend yields, and gross domestic product contain information that is useful in predicting stock prices. This evidence is commonly called calendar anomalies. Calendar anomalies refer to the tendency of stock market returns to show systematic patterns at a certain time of the day, week, month or year. The existence of the calendar anomalies is a denial of the weak form of efficient market hypothesis which states that the stock returns are time invariant. This paper provides a new and economically plausible explanation for turn-of-the-month anomaly. It covers the post reform period. The study uses the monthly return data of the BSE healthcare Index from 1 April 2002 to 31 March 2016 for analysis. After examining the stationarity of the return series, we specify a linear regression model to find the turn of the month effect. The results confirm the existence of seasonality in stock returns in India. The findings are also consistent with the ‘tax-loss selling’ hypothesis. The results of the study imply that the stock market in India is inefficient, and hence, investors can time their share investments to improve returns. We find that the turn-of-the-month effect still exists, but its occurrence has moved to earlier dates. We also find that investment made on days before the turn-of-the-month performs better than those made during the turn-of-the-month. Simple time diversification strategy of spreading investment throughout the month, which doesn’t require a perfect foresight, is also found to generate a better performance.

Turn of the Month effect, healthcare Index, Stock returns, Linear Regression, Strategy


IJTSRD8340
Volume-2 | Issue-2, February 2018
138-145
IJTSRD | www.ijtsrd.com | E-ISSN 2456-6470
Copyright © 2019 by author(s) and International Journal of Trend in Scientific Research and Development Journal. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (CC BY 4.0) (http://creativecommons.org/licenses/by/4.0)

International Journal of Trend in Scientific Research and Development - IJTSRD having online ISSN 2456-6470. IJTSRD is a leading Open Access, Peer-Reviewed International Journal which provides rapid publication of your research articles and aims to promote the theory and practice along with knowledge sharing between researchers, developers, engineers, students, and practitioners working in and around the world in many areas like Sciences, Technology, Innovation, Engineering, Agriculture, Management and many more and it is recommended by all Universities, review articles and short communications in all subjects. IJTSRD running an International Journal who are proving quality publication of peer reviewed and refereed international journals from diverse fields that emphasizes new research, development and their applications. IJTSRD provides an online access to exchange your research work, technical notes & surveying results among professionals throughout the world in e-journals. IJTSRD is a fastest growing and dynamic professional organization. The aim of this organization is to provide access not only to world class research resources, but through its professionals aim to bring in a significant transformation in the real of open access journals and online publishing.

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