Month- of-the-year effect in stock market returns: Evidence from India and China

The strong seasonal effect in stock market returns has been clearly established through a large number of studies, yet their logic and practical applicability is still being questioned. This study attempts to investigate the existence of seasonality in return series of Shanghai Composite Index (China), and BSE Sensex (India). The study analyses the monthly closing prices of these two indices for the period from January 2003 to December 2010 by applying a variety of statistical tools. Along with summary statistics, the non-parametric rank based Kruskal-Wallis test have been used to study equality of mean returns. The results are interesting and contradict the findings shown by international studies. The positive January effect is not found in India and China. But a positive November effect is persistent in Indian Stock Market.