Measuring Market Efficiency in the Capital Market of Pakistan

This research investigates day-of-the-week (DOW) and month-of-the-year (MOY) anomalies in Pakistan during the Gregorian and Islamic calendars. Applying GARCH models on KSE100 index data from November 1991 to May 2021, the paper investigates calendar anomalies over periods of overall, non-crises, crises, before and after capital market reform. Results identify a DOW anomaly in which strongly positive Wednesday returns and strongly negative Monday returns exist across all periods. MOY anomalies also present, as January and Ramzan effects confirmed international equity markets. Results were confirmed in robustness checks with dollar-adjusted returns and the KSE All Shares Index. It can be concluded from the study that Pakistani equity market returns are unpredictable, signifying inefficient markets. These findings will help investors to improve the accuracy of decisions based on using calendar-based anomalies.