Day of the Week Effect on Stock Return and Volatility: Evidence from Chittagong Stock Exchange

The study focuses on examining the stochastic process of return distribution in the Chittagong stock exchange (CSE) to deliver persistency of weak form of efficiency and time varying risk-return association for an emerging country like Bangladesh. This study used daily series of market index (CASPI) data over the period from January 1st 2004 to September 30th 2014.The OLS, GARCH (1, 1) regression and GARCH (1, 1) with dummy variable models are employed to identify the existence of the day-of-the-week effect on stock market returns and volatility. The empirical findings attained from the models verified that the day-of-the-week effects on stock returns and volatility are persistent in the stock market. Specifically, a negative effect is observed for Sunday while a positive effect occurs on Thursday. Moreover, the highest volatility occurs on Sunday and lowest volatility found in Thursday. All statistically significant results confirm the absence of weak form of efficiency in Chittagong stock exchange in Bangladesh.