Stock Market Anomalies in India and the United States

By

ACKNOWLEDGEMENT

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

DECLARATION

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

Signed __________________ Date _________________

ABSTRACT

The research study has been performed to analyze the stock market anomalies in the United States and Indian stock markets. There have been observed many stock market anomalies in the stock markets of the United States and India. There exist several reasons that have given rise to the stock market anomalies if the market imperfections are not taken care of. The stock markets of India and the United States have also been greatly affected due to the presence of the stock market anomalies. The higher returns on smaller stocks are concentrated in the first few days of January, and so this anomaly is referred to the January-size effect. One plausible explanation for the seasonality in the equity market is that there is seasonal variation in equity market risk, with some months being more risky for the investors than others. The empirical study that has been conducted in the research study concludes that there has been observed significant movements in the stock markets of Indian and the United States. There has been analyzed the monthly effect for the stock markets of the United States and India. The NASDAQ has been chosen from the stock markets of the United States. From the Indian stock market, Bombay Stock Exchange (BSE) has been chosen in order to analyze the monthly effect of the stock prices in the stock markets. The data was collected for ten years starting from the month of January 2001. The Ordinary Least Square regression analysis has been performed through the SPSS software. The results of the NASDAQ and the Bombay Stock Exchange (BSE) have been analyzed through different statistics table. These include the Descriptive analysis, Correlation, Model Summary and the Coefficients. The data has been collected from the DATASTREAM and the January effect has been analyzed in order to watch the monthly effect. The variables that have been taken are the stock returns and the number of shares sold in the stock market.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 1: INTRODUCTION1

Background of the Study1

Aims and Objectives5

Problem Statement6

Significance of the study6

Rationale of the study7

Research Questions9

CHAPTER 2: LITERATURE REVIEW10

Efficient Markets10

Strong Efficient Market11

Size Effect17

Contrarian Strategy18

January Effect19

Fusion19

Stock Markets in the United States20

Small Market Capitalization Stocks30

Large Market Capitalization Stocks31

CHAPTER 3: METHODOLOGY32

Rationale for a Qualitative Study32

Rationale for a Quantitative Study33

Research Design34

Literature Review34

Analysis, Conclusion and Recommendation36

Scope of the Research36

Underlying assumptions37

Possible alternative to the proposed methods37

Any difficulties and uncertainties38

Explanation of the rationale for the proposed methods38

Reliability/Dependability38

Validity39

CHAPTER 4: DISCUSSION42

Stock Returns and Volumes43

January Effect43

Sources of Data Collection44

CHAPTER 5: CONCLUSION59

Reasons of the Presence of Stock Market Anomalies59

Months Effect60

Size Effect60

Efficient ...