An Investigation Of The Day Of The Week Anomaly In Stock Returns For Companies Quoted In The Nairobi Securities Exchange

Abstract

This study sought to establish the effect of the day of the week anomaly in stock returns for companies quoted at NSE. A descriptive research design to describe the calendar anomalies at the NSE was used. The target population for this study included all the 65 institutions registered at the NSE. The data amassed consisted of the share prices between 1st January 2018 and 31st December 2018. The data for conducting the investigation was sourced from the NSE. Secondary data for the daily market price from 1st January 2018 to 31st December 2018 for each of the 5 days of the week was used. The analysis revealed that different days had a different return effect. Specifically, Thursday had the highest mean of the week was on which was 0.0001926 and standard deviation of .01079497. This implies that there was Thursday effect on the stock return of the week. The mean for the other days of the week were negative implying they had a negative effect on the stock return of the week. The study therefore, concludes that the highest returns are recorded on Thursday, while the lowest are recorded on Tuesday. This study also showed that returns decrease from Monday till Thursday then decreases again on Friday due to weekend effect. Thus, the study concluded that there is a pattern in the returns for the days of the week. The findings also showed that there existed different positive and negative correlation during the days of the week. Thus, based on these correlations, the study concluded that investors should focus their investment strategies on days of the week that are not significantly negatively correlated with Thursday to make their trading decisions. The study recommends that the day of the week anomaly purports that the existence of a pattern during the days of the week whereby these returns are linked to a particular day of the week. Owing to this pattern, investors can take advantage of and strategize on the investing trends. For instance, they can buy stock on Tuesday, which has the lowest return and sell on Thursday, which has a high return. Since the study has established that an anomaly effect exists during the days of the week, the study recommends that the government should come up with measures to ensure efficiency in trading. These measures would include various regulations that would ensure the stock market is fair trading ground with minimal chances of exploitation