Testing Behaviour of Daily Stock Return in Indian Stock Market during Pandemic Induced Crisis Period

Abstract

The present study empirically investigates the day-of-the-week effect anomaly in the Indian equity market considering daily data for the equity market index,S&P BSE Sensex for the period from January 1, 2018, to August 30, 2022.The pre-COVID period (Period 1) is assumed to be a period starting from January 1, 2018, until the lockdown announcement in India on March 25, 2020. The ‘during COVID (Period 2) period is from March 25, 2020, to August 30, 2022, consisting of the entire period from the date of announcement of the first lockdown in India on March 25, 2020, to August 30, 2020.The Ordinary Least Square technique has been used in analyzing the data. The study found that for the Entire period, Tuesday had the largest statistically significant return, with no positive returns on any other day of the week. All weekly coefficients of return, except Tuesday during the pre-COVID era were negative and not statistically significant. The study's total returns were notably favorable on Tuesday alone. Additionally, the observed results indicate statistically substantial negative returns in the market on Monday. Our research intends to help portfolio managers and ordinary investors comprehend portfolio allocation strategies in the face of COVID-19's varied week-to-week impacts and volatility.

Keywords: Daily Return, COVID-19, day-of-the-week effect, Volatility

DOI: 10.7176/RJFA/15-3-01

Publication date:March 31^st 2024