Day-of-the-week and turn-of-the-month effects on stock market in Malaysia.

The existence of seasonality in stock returns have challenged the notion under the Efficient Market Hypothesis. This paper examines the existence of day-of-the-week and turn-of-the-month effects in the stock returns of the Kuala Lumpur Composite Index (KLCI) in Malaysia for the period from 2000 to 2019. Using the ARIMA-EGARCH model, persistency of both effects are investigated using four shorter sub-samples. The findings from the whole sample show that while the day-of-the week effect is only present on the volatility but not on the mean returns, Monday is found to have the lowest returns and the highest volatility. The day-of-the-week effect on the volatility is found to persistently present while the absence of the effect on the mean returns is observed in three of the subsamples. Although the turn-of-the-month effect is found to present in the whole sample and quite persistently in the sub-samples, the effect is absent in the recent years. Evidence from sub-samples shows that while investors may obtain higher mean returns during the month-end period, the month-end period also present higher volatility than that during the mid-month period. Further analysis revealed that Monday is not necessarily a bad day at the stock markets with returns on Monday that fall during the month-end period are generally found to be higher than those on other days of the week. The absence of certain effects during shorter sub-samples imply that investors need to revise their trading strategy and that any strategy is only beneficial for short-term period. [ABSTRACT FROM AUTHOR]