A figure of surveies have been carried to analyse the relationship of anomalousnesss present in the stock market such as ; day-of-the-week, weekend, and January effects. These anomalousnesss have strong deductions in the stock market. The most of import anomalousness is monthly consequence on stock market. The monthly ( or January ) consequence suggested that day-to-day returns were higher in January than in any other month ( Cads by, 1989 ; Lakonishok & A ; Smidt, 1988 ; Cadsby & A ; Ratner, 1992 ; Raj & A ; Thurston, 1994 ; Mills, 2000 ; Floros, 2000 ) . Although some research workers did n’t happen the month consequence in different states despite it was considered as most of import anomalousness. The January returns were significantly higher than any other months ( Haugen & A ; Jorion 2006 ) . A similar survey has been carried in low income African states, i.e. , Ghana, Nigeria, and Zimbabwe. The consequences revealed no January consequence in Nigerian and Zimbabwean stock market whereas Ghanese stock market showed positive January consequence ( Ayadi & A ; Dufrene, 1998 ) . Floros ( 2008 ) suggested that January consequence does n’t be in the Grecian stock market. In add-on, January consequence was besides non found in the Ukrainian stock market ( Depenchuk, Compto, & A ; Kunkel ) .
Most of research workers found important January consequence on stock market, in which January return was higher than any other month. Most of the research workers suggested one should put at the starting of the January to give higher returns for following grounds:
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One of the strong causes of January consequence was tax-selling-hypothesis. Harmonizing to tax-selling hypothesis, most of the investors sell low priced stock before the terminal of twelvemonth to take down their revenue enhancement liability. Those same investors reactivate in January to buy portions which tends to raise stock monetary values.
Peoples sell their stocks because they go on holiday.
The seasonal anomalousnesss in the stock market have been studied in the different stock markets of the universe. Rozeff and Kinney ( 1976 ) found the January consequence in the USA, and so Guletkin and Guletkin ( 1983 ) reported significantly higher stock returns in January for most of 17 developed states. Reinganum ( 1983 ) and Roll ( 1983 ) besides found that January returns were higher than any other month.
However, Ramadan consequence can be studied in the Muslim states of the universe. Ramadan is the 9th month of Islamic calendar and it is regarded as the holy month. Ramadan, is the month of fasting, in which feeding, imbibing, and smoke is prohibited from morning to sunset. Hotels and eating houses remain closed in twenty-four hours times thought the holy month of Ramadan. In add-on, Muslims are encouraged to execute spiritual rites in the whole month, such as, fasting, salat-ul-nafil, recitation of Holy Quran, Aaitakaf, and execute societal services. Apart from that, some people besides visit Saudi Arabia to execute Hajj and Umrah. Moslems are refrained from wickedness and errors. In add-on to all these rites, timings of everyday activity changed i.e. office timings reduced. In last 10 yearss of the Ramadan people sat in mosques, which was named as Aaitakaf, in bend, it affected the activity in stock exchange. Hence, the intent of this survey was to look into how the alteration in these activities affected the stock return.
1.2 Problem statement
To analyze the Ramadan consequence on KSE-10 index.
As Ramadan starts in the Pakistan punters go to execute spiritual rites such as Hajj, Umrah, and Aaitakaf, which in bends lower the activity in the Karachi Stock Exchange. Karachi stock market comprises of 1000s of punters which invest on day-to-day footing in the stock exchange. As punters refrain from puting in the stock exchange that finally lowers the return on the KSE-100 index.
H1: Average day-to-day return in the month of Ramadan is lower than any other months of the twelvemonth
1.4 Outline of the Study
This survey was comprised of five chapters each chapter defined difference facets of the survey. Chapter one was about the debut, which described the in item about the subject, job statement, hypothesis of the survey and definitions. Chapter two consisted of literature reappraisal, which explained the old surveies taken in different stock exchanges of the universe. In chapter three, research method was explained. This chapter comprised of method of informations aggregation, sample size, research theoretical account developed and statistical technique. In chapter consequences of the research was explained, which comprised of determination and reading of consequences and hypothesis appraisal sum-up. Chapter five comprised of decision, treatment, execution and recommendations and future research of the survey.
Punters: A retail merchant who is puting in stock market on day-to-day footing
A figure of anomalousnesss have been investigated in the different stock markets around the universe like day-of-the hebdomad consequence, weekend consequence, vacation consequence, and calendar consequence, which was best known as January consequence. These anomalousnesss have strong deduction in stock market. The most of import anomalousness was month consequence. The month ( or January ) consequence suggested than average day-to-day return in the month of January was higher than any other months of the twelvemonth. One account for this was tax-loss merchandising hypothesis ( Branch, 1977 ) . This was defined as selling loser portions at loss in order to avoid revenue enhancement levied on the additions of other investings. A survey by Johnston and Cox ( 1996 ) incorporated this survey through the houses which was likely claimant of tax-loss merchandising. Those houses which face big diminution in the last half of the twelvemonth witnessed the positive January returns in the consecutive twelvemonth.
Mahendra Raj and Damini Kumari ( 2006 ) conducted the survey on Day-of-the-week and other market anomalousnesss in the Indian stock market. The intent of this survey was to happen out the being of these anomalousnesss in the Indian stock exchange. The survey was aimed at happening the public presentation of Indian stock market, which included figure of hypotheses. Weekday effects, weekend consequence, day-of-the-week, January and April effects were investigated through figure of statistical techniques. The survey found no January consequence and Monday consequence in the Indian stock market. The consequences were really different as compared to the consequences found in other stock markets of the universe.
Robert A. Haugen and Philippe Jorion ( 1996 ) conducted survey on The January Effect still at that place after all these old ages in the New York Stock Exchange ( NYSE ) . The intent of the survey was to look into the January consequence presence in NYSE after the many old ages of outgrowth in the stock markets of the universe. The information was collected from 1926 to 1993, which comprised of all the companies listed on the New York Stock Exchange. Regression analysis was used to happen out the consequences of the survey. The consequences were interesting and gave grounds that after many old ages January consequence was present in the NYSE. The ground for this behaviour was that investors sold their stock in the month of December in order to avoid capital addition revenue enhancement. In January investors ‘ reinvested money, this increased the monetary values of stocks. Hence, the stock return in the month of January was higher than any other months of the twelvemonth.
Christos Floros ( 2008 ) analyzed the January consequence in Greek Stock Exchange. The intent of the survey was to look into the behaviour of stock return January and other months of the calendar. To analyze the consequence the information was collected from Athens Stock Exchange ( ASE ) , which consists of shuting monetary value of ASE General Index. This was collected from the period of 1996 to 2002. The survey found that there was no January consequence on ASE. Furthermore, survey concluded that average day-to-day return in the month of January was same as the average day-to-day return in the other months of the calendar.
O. Felix Ayadi and Uric B. Dufrene ( 1998 ) examined the turn-of-the-year or January consequence in low-income stocks markets of the Africa. Ayadi and Dufrene ( 1998 ) tested whether January consequence was presented merely in middle-income and high-income stock exchanges of the universe or it were predominating all over the universe including low-income equity markets of the Africa. The information was collected from three stock exchanges of the low-income African stock exchanges i.e. Ghanese stock market from 1991 to 1996, Nigerian stock market from 1984-1995 and Zimbabwean stock market from 1987-1995. The Wilcoxon-Mann-Whitney pairwise trial was applied to establish out the January consequence. The consequences shown that January consequence was present in Ghanese stock market, nevertheless, there was no January consequence Nigerian stock exchange and Zimbabwean stock exchange.
Angel Berges, John J. McConnell and Gary G. Schlarbaum ( 1984 ) tested the presence of January consequence in Canadian stock exchange. In Canada there was no capital addition revenue enhancement until 1973, which was the chief ground for alteration in the return in the month of January and other months of the twelvemonth. The information was collected from the period of 1950 to 1980. The consequences were positive ; research found that January consequence was present in the Canadian stock exchange. Furthermore, research besides confirmed that there was relationship between high stock returns in January and tax-loss merchandising hypothesis.
Iryna O. Depenchuk, William S. Compto and Robert A. Kunkel ( 2008 ) investigated the presence of January consequence in Ukrainian stock exchange. The intent of the survey was to establish out the weekend and January consequence in the Ukrainian stock exchange. In order trial the January consequence, arrested development analysis was used to establish out the consequences. The information consisted of day-to-day index from the period of 2003 to 2008. The day-to-day return was calculated from the day-to-day index of the stock exchange. The consequences were non back uping the old surveies carried in other stock exchanges of the universe, nevertheless, consequences shown that there was n’t any presence of January consequence in the Ukrainian stock exchange.
Gao and Kling ( 2005 ) conducted similar survey in the Chinese stock market with the intend to prove the calendar anomalousnesss which were present in the other stock markets of the universe. The purpose of the survey was to reason whether the day-to-day effects and monthly effects were present in the Chinese stock exchange. The information was collected from the Shanghai and Shenzhen stock exchanges, which consisted of index informations from the period of 1990 to 2002. There was no January consequence in Chinese stock market ; nevertheless, the average day-to-day return in the month of February was higher than any other months of the calendar. The Chinese calendar twelvemonth terminals in the January, which is similar to the twelvemonth terminal at the December harmonizing to the Georgian calendar. The account for this high return was that Chinese investors were armature and short term investors and investors embezzle financess to harvest high returns in at the beginning of Chinese calendar, which is similar to the January.
Jaffe and Westerfield ( 1985 ) conducted survey on unnatural stock return for four states viz. Australia, Canada, Japan and U.K. The information was collected from the stock exchanges of the each state. For Japan informations comprised of Nikkei Dow index from the period of 1970 to 1983, for Australia information was collected from Statex Actuaries Index from the period 1973 to 1982, for Canada information was gathered from Toronto Stock Exchange from the period of 1976 to 1983, for U.K. information was collected from the Financial Times Ordinary Share Index from the period of 1950 to 1983. The chief intent of the survey was to prove the day-of-the-week or weekend consequence in all these stock exchanges of the four states. The consequences showed that there was weekend consequence in stock exchanges of those states. The survey concluded that Friday returns were higher than any other yearss of the hebdomad and Tuesday return was lower than other yearss. The ground for high Friday return was that investors increase their activity in last twenty-four hours to rebalance portfolio.
Mark Haug and Mark Hirschey ( 2006 ) carried the survey to prove the January consequence on U.S. stock market. Haug and Hirschey ( 2006 ) were interested to look into the presence of unnatural returns in the month of January after many old ages of January consequence outgrowth. The information was collected from the New York Stock Exchange. The survey concluded that January consequence was present in the NYSE even after the debut of Tax Reform Act of 1986 ; this strongly supported the tax-loss merchandising hypothesis.
Paul Schultz ( 1985 ) examined the relationship between personal income revenue enhancements and January consequence before War Revenue Act 1917 and for the period of 1931 to 1978. The intent of the survey was test the January consequence before the 1917 and after the 1931. The information was collected on the Dow Jones Industrial Index for two periods ; one was from 1900 to 1917 and other was from 1931 to 1978. The survey revealed that before Revenue Act of 1917 there was n’t any presence of January consequence in the NYSE. Meanwhile, survey found that strong presence of January consequence for the period of 1931 to 1978. The survey concluded further that stock return was higher for little capitalisation houses than high capitalisation houses. Furthermore, tax-loss merchandising hypothesis theory was confirmed for such high returns in the month of January.
Kaur ( 2004 ) used two Indian Stock indices, the Bombay Stock Exchange ( BSE ) 30 index and National Stock Exchange ( NSE ) S & A ; P CNX Nifty stock index to look into day-of-the-week consequence and monthly consequence. There was no January consequence found on the Indian Stock Indices. However, survey found positive February and December returns. Furthermore, lower returns were found in the month of March and September.
Ignatius ( 1998 ) investigated the anomalousnesss in BSE index in Standard and Poor ‘s 500 stock indices from 1979 to 1990. Ignatius ( 1998 ) did n’t happen any January consequence on BSE index ; nevertheless, Ignatius found that average returns in the month of December were the highest in the twelvemonth. In add-on, average returns in the month of April and June were high.
Yakob, Beal and Delpachitra ( 2005 ) investigated seasonal anomalousnesss in the 10 Asian Pacific stock markets, including the Indian stock market from January 2000 to March 2005. Yakob et Al. ( 2005 ) found negative March and April mean returns in Indian stock market. Meanwhile, May, November, and December exhibited the positive mean returns. From these average returns, November was found to be the most moneymaking in footings of average return while April was found to be the worst in footings of average return. The consequences were amazing because it exhibited the behaviour which was different from the stock markets of the remainder of the universe. In add-on, consequences were contradicting the tax-loss merchandising hypothesis.
Patel and Evans ( 2003 ) examined the seasonal behaviour in the stock markets of most industrialised states, which are besides known as G7 states. They examined the information from the period of January 1960 to December 2001. Patel and Evans ( 2003 ) found that average stock returns for December through May were higher than average returns for the June to November in all G7 states.
Keppler and Xue ( 2003 ) investigated the seasonal monetary value behaviour of 18 stock markets in developed states for the period of 1970 to 2001. Keppler and Xue ( 2003 ) found that returns in from November through April were higher as comparison to the returns from May to October. Keppler and Xue ( 200 ) termed November through April months as “ Good Calendar months ” and Mat through October as “ Bad Months ” for puting in stock market.
Most of the surveies found higher returns in the month of January and lower returns in the month of December ( Keim, 1986 ; Chatter Jee & A ; Maniam, 1997 ) . The January return was besides associated with the size of the house. The fact was demoing that little capitalisation portions do execute better than big capitalisation portions in the month of January. There were two grounds for this alteration in the return. One was tax-loss merchandising hypothesis, which entailed that investors sold their stocks in December and reinvested in the month of January that reaped high return in the month of January. Second was portfolio rebalancing, which entailed that establishments purchased the many stocks in the month of January which made possible stock returns to rose in the month of January.
In add-on to the January consequence, other anomalousnesss have besides enticed the attending of research workers, such as December-end vacation consequence ( Ariel, 1990 ) , which states that the pre-holiday returns were higher. Another anomalousness was the bend of the month consequence ( Ariel, 1987 ) where end month returns were found to be higher than the get downing returns. The Friday the 13th consequence indicates that return on these yearss were negative as compared to other Fridays ( Kolb & A ; Rodriguez, 1987 ; Dyland Maberly, 1988 )
Fama ( 1970 ) introduced Efficient Market Hypothesis ( EMH ) . The EMH provinces that fiscal markets were informational efficient. That was, the information was available to all public, therefore, one can non gain returns inordinate to average market returns. The EMH states the stock returns should be same i.e. there should non be abnormality in stock monetary values, therefore, stock returns.
Husain ( 1999 ) investigated the seasonal behaviour of equity market in Pakistan. The intent of the survey was to happen out the stock return behaviour in the month of Ramadan. The information was collected from the Karachi Stock Exchange ( KSE ) from the period January 01, 1989 to December 30, 1993 on eight sector indices. GARCH theoretical account was used to prove the behaviour of stock returns in the month of Ramadan and other months of the calendar. The survey found that there was n’t any Ramadan consequence in KSE.
Shahid Ali and Muhammad Akbar ( 2009 ) conducted the survey in Pakistani Stock Exchange. The purpose of the survey was to analyze daily, hebdomadal and calendar effects on Karachi Stock Exchange. The information was collected from 1991 to 2006 on KSE-100 index. Autoregressive Integrated Moving Averages and Ordinary Least
Squares were used to prove these effects. The consequences revealed no month consequence in Karachi Stock Exchange. The ground for such behaviour was the Efficient Market Hypothesis, which entailed stock return was independent of old yearss return.
Alexakis and Xanthakis ( 1995 ) examined the day-of-the-week consequence in Athens Stock Exchange for the period of January 1985 to February 1994. Nikou ( 1997 ) besides examined the weekend consequence on Athens stock market. The consequences shown high returns on Monday and Fridays, negative mean returns on Tuesdays and Wednesdays.
Fazal J. Seyyed, Abraham Abraham and Mohsen Al-Hajji ( 2005 ) conducted survey on the Ramadan consequence in Saudi Arabian stock market. The intent of the survey was to look into the Ramadan consequence, which is similar to the January consequence, in Saudi Arabian stock market which is the largest stock market among Moslem states. The informations comprised of hebdomadal index of six sectors of the economic system from the period of 1985 to 2002. Autoregressive Conditional Heteroskedastic theoretical account was used to prove the consequence. The survey revealed that there was no Ramadan consequence in Saudi Arabian stock market, the average return in the month of Ramadan was similar to the other months of the Islamic Calendar.
3.1 Method of Data Collection
In this survey, chief aim was to happen out the average day-to-day return of stocks in the month of Ramadan and other months of the Islamic Calendar. In order to cipher the average stock return on KSE-100 index the survey required the day-to-day shutting KSE-100 index.
Secondary method of informations aggregation has been used for this survey, because the information was readily available. The information was collected from Standard Capital Securities ( SCS ) Pvt. Ltd. The information consists of day-to-day Karachi Stock Exchange or KSE-100 index. There are four indices predominating in the Karachi Stock Market i.e. KSE-All portion index ; KSE-100 index, which was introduced in 1991 ; KSE-30 index, which was introduced in 2006 ; and KMI-30 index, which came into being in 2008.
The KSE-100 was launched in 1991 with a base of 10,000 points. KSE-100 index is working as a benchmark in Karachi Stock Exchange to compare the monetary values over the clip. KSE-100 index consists of 100 companies, the standards for choice of 100 companies was based on the sector representation and the highest market capitalisation. KSE-100 index comprises 80 % of entire market capitalisation of all the companies listed on Karachi Stock Exchange. There are 35 sectors listed on KSE, out of those 34 companies are selected from each sector on the footing of highest market capitalisation. However, Open-End Mutual Fund Sector was excluded from the KSE-100 index. Staying 66 companies are included in the KSE-100 on the footing of largest market capitalisation.
3.2 Sample Size
Since secondary informations was available with securities firm houses. Datas from January 1995 to October 2010 has been analyzed for the research intent. The day-to-day shutting KSE-100 index was used for the survey intent. Data was collected from the Standard Capital Securities Pvt. Ltd. and Taurus Securities Pvt. Ltd. , which is subordinate company of National Bank of Pakistan.
3.3 Research Model Developed
To cipher the return on the KSE-100 index following theoretical account was used by utilizing the log natural.
R = ln KSE-100t – ln KSE-100t-1
Where R is the return, KSE-100t is the value on t clip and KSE-100t-1 is index value on the twenty-four hours before t clip. The shutting value of the index at the terminal of the twenty-four hours was taken in order to cipher the day-to-day return.
3.4 Statistical Technique
Trial of independency was used by taking hypothesis into history ; Statistical Package for Social Sciences ( SPSS ) is used to analyse the information.
There was two groups in the informations file i.e. Ramadan ( Ramadan =1 ) and Otherwise ( Otherwise = 0 ) , by sing these two groups trial of independency was carried to happen the consequences.
4.1 Findingss and Interpretation of Results
The information consisted of entire 3987 instances, out of which there was 3641 instances consisted of informations on other months i.e. Muharram, Safar, and so on. Out of 3987 observations 346 observations comprises of Ramadan instances.
In table 4.1 consequences were depicted about the agencies of two groups i.e. Ramadan and Otherwise. In Ramadan average day-to-day return was higher than other months, which was 0.30469539. While the average day-to-day return in other months were 0.01580514. In add-on to the average return, standard divergence of the each group was presented.
Furthermore, the survey revealed that average return in the month Ramadan was higher than any other month of the Islamic Calendar. Husain ( 1999 ) tested that there was no Ramadan consequence in Karachi Stock Exchange. However, this survey concluded that there was Ramadan consequence on KSE-100 index.
Independent Samples Test
Levene ‘s Test for Equality of Discrepancies
t-test for Equality of Means
95 % Assurance
Time interval of the
( 2-tailed )
In table 4.2, sig. value of Levene ‘s Test for Equality of Variances was less than 0.05, which was 0.01. It means rejecting the hypothesis that discrepancy was same. So taking the 2nd row into history, survey can reason the average difference can travel from -0.44877 to -0.129009.
Seyyed, Abraham and Al-Hajji ( 2005 ) conducted the same type of survey in Saudi Arabian Stock market ; nevertheless, Saudi Arabian stock exchange did n’t exhibit the Ramadan consequence.
But in this survey, KSE-100 index exhibited the Ramadan consequence. The account for such a behaviour was that over the recent old ages Karachi Stock Exchange got stabilized and it reached to the highest degree of 15000 points, which enticed investors invest more money. In add-on, investors used to forbear from puting in the stock market in the month of Ramadan but recent tendency shown that investors put much money in order to harvest high returns in the month of Ramadan.
4.2 Hypothesis Assessment Summary
The Centre of every survey was hypothesis and the hypothesis in this survey had important impact on the average day-to-day return in the different moths of the calendar.
H1: Average day-to-day return in the month of Ramadan is lower than any other months of the twelvemonth
DISCUSSIONS, CONCLUSION, IMPLICATIONS AND FUTURE RESEARCH
In this survey, trial of independency was used to analyze the average day-to-day returns on the KSE-100 index daily informations, which was from January 1995 to October 2010. Independent t trial was used to get at the average returns in the month of Ramadan and other months of the twelvemonth.
There were tonss of the surveies, which have been carried in the stock exchanges in the different states such as day-of-the-week consequence, weekend consequence, and moth consequence, which is best known as January consequence. In add-on, some research workers have besides investigated the April or November consequence. Most of the surveies found that January consequence persists in most of the stock exchanges of the universe, which means higher January returns and lower or negative returns in other months of the twelvemonth. However, in Islamic states such as Pakistan, surveies can transport to happen out the effects like Ramadan consequence, Friday consequence, and so on. This survey investigated the Ramadan consequence in Karachi Stock Exchange or KSE-100 index. After analysing the more than 15 old ages data, the survey concluded that average return in the month of Ramadan was higher than any other month of the twelvemonth.
Equally for as the return on KSE-100 index in the month of Ramada that survey revealed that return in the month of Ramadan was higher than any other months of the Islamic calendar. The ground for this may be the economic triggers of the state. As the economic state of affairs is non good, investors wished to harvest maximal return so they can run into their outgos. In bend, investors had invested much in the month of Ramadan, which in bend, reaped highest return.
5.3 Deductions and Recommendations
This survey helped investors, agents, fund directors and stakeholders to analyse the behaviour of return over the twelvemonth. Furthermore, it besides helped the investors to make up one’s mind in which month they should put in order to harvest the highest return on their investings.
However, the major issue for this survey was that it gives consequences on the mean footing, which may sabotage the returns. Furthermore, it besides includes the period of 1998 when Pakistan tested atomic arms, in bend, universe imposed limitation on trade. In add-on, it besides includes the recession period of 2008.
5.4 Future Research
In future so many anomalousnesss can be investigated of these types. Research workers can look into the consequence on Islamic indices i.e. Karachi Meezan Index or KMI-30 index, Dow Jones Islamic index, and so on. Furthermore, researcher can look into the Moharram consequence, Rabi-ul-awal consequence.