Semi Month Effect in Indian Health Care Sector with Reference Bse Health Care Index

IJSRD - International Journal for Scientific Research & Development| Vol. 3, Issue 08, 2015 | ISSN (online): 2321-0613

Semi Month Effect in Indian Health Care Sector with Reference BSE Health Care Index J. Sudarvel1 Dr. R. Velmurugan2 Dr. K. Kumuthadevi3 1 Research Scholar 2Associate Professor 3Professor & Head 1 Department of Management Studies & Research 2,3Department of Commerce 1,2,3 Karpagam Acedamy of Higher Education, Coimbatore- 641021, Tamilnadu, India Abstract— This study investigates the existence of a Semi month effect in India‟s Health Care sector. The study uses the daily return data of the Bombay Stock Exchanges (BSE) Health Care (HC) Index for the period ranging between April 2006 and March 2015. After examining the random of the return series, we insist on Descriptive statistics & paired „t” test to find the semi month effect in stock returns in India. The outcomes confirm the presence of seasonality in stock returns in India and the semi month effect. The findings are also reliable with the semi-month effect does exist in the BSE Health Care index. The results of the study imply that the stock market in India, Health Care sector is inefficient, and hence, investors can time their share investments to expand returns.

Key words: Anomalies, Semi Month Effect, BSE Health Care Index, and Efficient Market Hypothesis I. INTRODUCTION Stock market efficiency is amongst the most researched areas in finance. Stock markets are considered efficient informational. The weak form of market efficiency states that it is not possible to predict stock price and return movements using past price data. Following Fama (1965; 1970), a huge number of studies were conducted to test the efficient market hypothesis (EMH). These studies mostly have shown that stock prices behave randomly. More recently, however, researchers have collected evidence opposing to the EMH. They have identified systematic variations in the stock returns. The important anomalies include the Semi Monthly effect and the seasonal effect. The existence of the seasonal effect denies the weak form of the EMH and implies market inefficiency. In an inefficient market investor would be able to earn abnormal profits, that is, returns that are not appropriate with risk. Semi month effect the mean return of the First Half of the Month has been compared to the return of the second half of the month.

The purpose of studying Semi-month Effect is to find suitable investment time during fortnight month. Among the pioneers of empirical evidence for semi-monthly is the research study carried by Ariel (1987). In particular, Ariel (1987) claimed that in the US equity markets, it seems that positive average returns were earned only around the commencement and during the first half of calendar months, and zero average returns during the second part. In this respect, Penman's (1987) claimed that this anomaly could be justified based on the tendency by firms to state good news during the first half of the month and bad news during the second half. Similarly, Jaffe and Westerfield (1989) reported the intra-month effects on the Australian market but not for Japanese, Canadian and British markets.

II. REVIEW OF LITERATURE Bodla BS, Kiran Jindal (2006), in their study found that the returns of the Month Effect and Semi Monthly Effect were prevalent in the Indian Stock Market. Eleftherios Giovanis (2009) in his study found that the semi-month effect, where in 7 and 2 cases we accept for both fortnights that there are significant lower and higher returns, while in additional cases it is accepted that the hypothesis there are significantly lower returns in the second fortnight in India and higher returns in the first fortnight for Canadian stock index.

Nageswari P, Selvam M, Karpagam V (2011), in their study found that the mean returns in the First Half of Calendar Month were lower than the mean returns in the Second Half of the Calendar Month during the study period. The paper reports an Insignificant Semi-Monthly Effect across all years. Nageswari. P, DR.M. Selvam and DR.J. Gayathri (2011) in their study entitled “AN EMPRICAL ANALYSIS OF SEMI MONTH AND TURN OF THE MONTH EFFECTS IN INDAIN STOCK MARKET” examines the return of the month effect in Indian stock market. The study has been carried out to find how bad news and good news is reflected stock prices. The study considers S & P CNX Nifty and BSE Sensex data for six years from 1st January 2005 to 31st December 2010. The collected data are analysed by applying„t‟ test. The result of the study disclose that highest mean return was recorded for the first half of the month than the rest of the days in the month. Result of the study also shows that the semi-month effect and turn of the month effect was not prevalent in the Indian stock market during the study period. By analysing these anomalies in Indian stock market it is concluded that most of the cash flow entered in the Indian stock market in first few days of the month, as a result indices stock prices to move upward.

Ushad Subadar Agathee (2009) in his study found that whether or not there exists semi-monthly on the SEMDEX return data for the period August 2006 to May 2009. When individual years are considered separately, the paper reports an insignificant semi-monthly effect across all years.

III. OBJECTIVE OF THE STUDY To identify the existence of the Semi month Effect in Indian Health Care sector.

IV. RESEARCH METHODOLOGY This study is analytical in nature. Secondary data collected from the BSE web portal for the period ranging between April 2006 and March 2015.

V. FRAMEWORK OF ANALYSIS The collected data have been analysed by making use of Descriptive statistics like as Mean, Standard Deviation,

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Semi Month Effect in Indian Health Care Sector with Reference BSE Health Care Index (IJSRD/Vol. 3/Issue 08/2015/002)

Variance, Skewness, Kurtosis and Shapiro-Wilk test and paired „t‟test.

VI. LIMITATION Considering the continuity of data, the only BSE HC Index has been selected for the study. Hence, utmost care is exercised while generalizing the result.

VII. ANALYSIS AND INTERPRETATION

Table 1: Statistics The results of Descriptive Statistics for BSE HEALTH CARE INDEX return for the period from APRIL, 2006 to MARCH, 2015 The above Table showed that the mean returns of the selected Index were positive for First half of the month return (.1106). The mean returns of the selected Index were negative for Second half of the month return (.0003). The high volatility was noticed on first half of the month return at Variance of (1.419), low volatility was noticed with Second half of the month return at Variance of (1.352).

The Skewness of the BSE IT INDEX returns was found both first half of the month and second half of the month returns were negatively skewed or skewed left, meaning that the left tail is longer. The Kurtosis of the BSE IT INDEX returns was found leptokurtic in First half month returns (6.877) and second half month returns (6.700) its kurtosis value >3 central peak is higher and sharper, and its tails are longer and fatter.

Shapiro-Wilk test BSE BANK INDEX returns was found for the p-value is less than 0.05. It is clearly proved that the data are not normally distributed there is an anomaly in the BSE HEALTH CARE INDEX.

To find the mean returns, volatility and Normality in the BSE Health Care index descriptive Statistics like Mean, Standard deviation, Variance, Skewness, Kurtosis, and Shapiro-Wilk test are made use of the following table narrates the result of descriptive study.

Statistics First Half Second Half Mean .1106 .0003 Median .1400 .0466 Std. Deviation 1.19140 1.17206 Variance 1.419 1.352 Skewness -.967 -.808 Kurtosis 6.877 6.700 Minimum -8.93 -9.06 A. Paired ‘t’ test Maximum 5.06 7.23 To find share index differs between the first half and the Shapiro-Wilk .000 .000 second half of the month paired „t‟ test is employed.

Source – Database collected from BSE web portal and computed.

Mean N Std. Deviation Paired t value P value FIRST HALF .1106 1087 1.19140 2.200 .028 SECOND HALF .0003 1087 1.17206 Source – Database collected from BSE web portal and computed.

Table 2: Test Calculated as the p value is less than 0.05, meaning This implies that the Indian stock market may not efficiently that the difference is statistically significant, so it can be with available information. As a consequence, perhaps indicated that the semi-month effect does exist in the BSE investors can expand their returns by timing their HEALTH CARE index. It is inferred that share index return investments. differs between the first half and the second half of the The result of the study raises the question efficient month. market hypothesis which states that stock prices are random, and that investors cannot make abnormal profits using past prices. The Semi month effect patterns in return and VIII. SUGGESTIONS volatility can enable investors to take advantage of The study found that the Highest Mean Returns were moderately regular market shifts by manipulative and documented in the First Half of the Month Return in the implementing trading strategies, which account for such Semi-Month effect. Hence, Indian investors are advised to predictable patterns. Specially, our results indicate lower preferably buy HEALTH CARE sector scripts for the returns on Second half of the month and maximum returns Second half of the month (buy low) and sell them on a First on a First half of the month in the BSE HEALTH CARE half of the month (sell high) period because it will give index. So, the specific trading regulation that could be better returns. conceived of being that one could consider buying the scripts for every month second half (buy low) and selling IX. CONCLUSION them on an every month First half (sell high). However, this The study focused on the existence of a semi month effect in tactic essentials to be implemented with caution. We suggest the BSE HEALTH CARE index in India. We used the daily is that investors could experimentation the above policy, to returns data of the BSE HEALTH CARE index for the start with, on small stocks and extend the same on blueperiod from April 2006 to March 2015. The analysis of chips based on the risks and rewards. This advantages descriptive statistics displayed that the maximum average further energy as Indian markets are more translucent and return occurred in the First half of the month and lowest in are open to the worldwide investors seeking profitable trade the second half of the month. The Calculated paired „t‟ test opportunities. value is statistically significant as the p value is less than 0.05 its indicated that the semi-month effect does exist in the BSE HEALTH CARE index. The results of the study indicate that stock returns in India are not entirely random.

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Semi Month Effect in Indian Health Care Sector with Reference BSE Health Care Index (IJSRD/Vol. 3/Issue 08/2015/002)

REFERENCES [1] ARIEL and Robert. A (1987) “A monthly effect in stock returns” Journal of Financial Economics, Volume 18, Issue 1, March 1987, Pages 161-174.

[2] Bodla BS, kiran jindal (2006). “Monthly Effects in Stock Returns: New Evidence from the Indian Stock Market”. The ICFAI J. of Applied Finance. 12(7): 5-13.

[3] Nageswari P, Selvam M, Karpagam V (2011). “An Empirical Analysis of Semi-Monthly Effects: Evidence from the Indian Stock Market”. Management in the Age of Innovation – NCM 2011, Ed. By Sheik Mohamed, Jamal Institute of Management. Arun Vasam Publishers, Tiruchirappalli: 312-316.

[4] SUDARVEL. J and Dr. R. VELMURUGAN (2015) “INDIAN STOCK MARKET ANOMALIES: A LITERATURE REVIEW” International Journal of Advance Research in Computer Science and Management Studies Volume 3, Issue 2, February 2015 pg. 173-178 [5] Fama, E. F. (1965a), Random walks in stock market prices, Financial Analysts Journal 21(5), 55–59.

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