Abstract:
This paper provides evidence for the presence of the
negative Monday effect and positive Wednesday effect in
returns denominated in local currency in the sample for the
period July 1997 to September 2004 . The observed daily
patterns in local currency shows a pattern of higher
returns around the middle of the week i.e Tuesday and then
Wednesday , a lower pattern towards the end of the week i . e
Thursday and then Friday, and a negative pattern on the
beginning of the week that is Monday.
The object i ve of the study is to provide the insights
of the days of week effect to the investors so that they
can plan their investment strategies accordingly . If the
effect of Monday is low they will purchase the stocks and
the days on which they will be getting higher return they
can sell and can earn profits . This will minimize their
risks . The null hypothesis is of an equal returns across
the days of the week, which is not accepted in the research
project .
In the research the standard Ordinary Least Squares
(OLS) methodology is applied by regressing the returns on
five daily dummy variables .
The research finds the negative Monday effect and
positive Wednesday effect during the week but in Karachi
stock exchange it was found through our research that the
effect of days of the week is not statistically
significant . So it is concluded that the investors can
hardly plan their strategies .
For further researches it may be recommended in the
end that rather the number of years should be increased t o
have more accurate results or by doing the research with
the combining the stock market volatility as well using
models like ARCH or GARCH that can help in generating more
accurate results and giving a more clear look to the
investors.
