The study examines the October Effect in the emerging Indian stock market. Increasing interest of investors in emerging market has motivated a great deal of research aimed at understanding the risk and return characteristics of stock prices in every month, especially in the month of October.October has traditionally been a scary month for stock markets. Remember the October 2005 when the sensex fell from a high of 8,821 (reached on 5) to a low of 7,656 on the 28, a fall of 13.2% in a little over three weeks. It is not just that year's traumatic experience that makes the market players nervous about October. The month has been associated with some of the worst crashes in market history.
A historical analysis has found that despite October's reputation for market falls, September is the month most prone to crashing. The analysis found that October has recorded an average index drop of 0.25% over the last 22 Septembers in FTSE 100.October's bad reputation may be well deserved in the Indian market. Despite being the month in which Diwali is usually celebrated markets have not done well during October. In the past 17 Octobers between 1991 and 2007 the market has gone up just six times, it has been flat once and fallen on 10 occasions.
A
collection of theories shows us that certain days, months
or times of year are subject to above-average price changes
in market indexes and can, therefore, represent good or
bad times to invest. Some theories that fall under the calendar
effect include the Monday effect, the October effect, the
Halloween effect and the January effect. |
