An Empirical Analysis of January Effect – Evidence from Indian Market

This paper investigates calendar anomalies in stock returns which occur due to deviation in normal behaviors of stocks with respect to time periods. The anomaly under study is one of the most common calendar anomaly detected in various International markets, the January effect. The research used secondary data from the stock market. The empirical research is conducted using daily logarithmic percentage returns of the S&P CNX Nifty. It is taken as a proxy of National Stock Exchange because it represents about 66.17% of the free float market capitalization of the stocks listed on NSE as on March 31, 2015. The data is taken over a period of twelve years (April 2002 – March 2014) and divided into two equal sub-periods, one from April 2002 – March 2008 as sub-period I& other from April 2008 – March 2014 as sub-period II, to take the impact of the crisis into account and to check the robustness of the results. Analysis part contains descriptive statistics of the variables, graphical representation of means of variables, cross-correlation among the variables, unit ischolar_main test to check the stationarity of time series data for the applicability of a regression model. A regression model using dummy variables is run to test the presence of these seasonal effects as used by NPR Deyshappriya in his paper in all the above mentioned three periods separately, but the results provide no support for the existence of January effect in the Indian Stock returns except significant negative October effect in sub-period II.