The Time of the Month Anomaly in Stock Index Returns: Evidence from Karachi Stock Exchange

The prime aim of this study is to test the time of month anomaly proposed by Kohers and Patel (1999). For this purpose daily data taken from 1^st Jan, 2000 to 1^st Jan, 2014 for Karachi Stock exchange 100 index. The results reveals that mean daily return are found higher for the First third of the month while the mean daily return became lower in the Second third of the month. The results also confirm lower and even negative mean daily returns in the Last third of the month. The time of month effect is also tested using regression analyses which confirm significant positive effect in the First third of the month, and no effect in the Second third of the month while significant negative effect in the last third of the month. These results provide the evidence of deviation from efficient market theory and confirms anomaly in the selected market. Time of the month affect in returns may enable investors to take advantage of the relatively regular shifts in the market by designing their trading strategies.