The presence of the seasonal or monthly effect in stock returns has been reported in several developed and emerging stock markets. This study investigates the existence of seasonality in return series of Dhaka Stock Exchange (DSE) of Bangladesh. The study uses the monthly return data of the DSE all share price index (DSE All Index) for the period from 1993 to 2006 for the analysis. After examining the stationarity of the return series, we specify a "combined regression-time series model" with dummy variable for months to find the monthly effect in stock returns in DSE. The results confirm the existence of seasonality in stock returns in DSE but do not support the "tax-loss-selling" hypothesis. Instead of "July effect" (January effect), we find an "April effect" in DSE. The results of the study invalidate the paradigm of the efficient market hypothesis in DSE meaning that, investors can time their share investments to improve returns.
|Number of pages||10|
|Journal||International Research Journal of Finance and Economics|
|Publication status||Published - Feb 2009|