Since 1990s, Indian Stock Market has witnessed various changes to the market microstructure, including efficient clearing and settlement systems with intent to improve efficiency of the Stock market. Research on stock markets in developed countries has accumulated evidence on the existence of calendar regularities in stock returns. The calendar regularities such as ‘Day of the Week effect” observed in the stock market returns has been related to settlement procedures. In this paper, we investigate whether the rolling settlement procedures made the Indian stock market efficient and particular attention is given to the evidence of Calendar anomaly especially the ‘Day of the Week effect’ on returns during fixed weekly settlement regimes and during rolling settlement regimes -T+5, T+3 and T+2. We use a dummy regression model to analyze the day of the week effect during and after the fixed day weekly settlement regime. The analysis of results indicate presence of day of the week effect during Fixed day weekly settlement regime and the effect disappears with the introduction of rolling settlement procedures such as T+5, T+3 and T+2.
stock returns, day-of-the-week effect, rolling settlement, anomaly, market efficiency, market microstructure
