Evidence of adaptive market hypothesis in the Indian stock market through analysing day of the week effect

This research empirically investigated the existence of the adaptive market hypothesis (AMH) by investigating the day of the week effect (DOW), a commonly used calendar anomaly, using both symmetric and asymmetric GARCH models on the Nifty 50 data from 1 January 2002 to 31 December 2024. The study utilises three-year, four-year and five-year rolling windows with one year rolling forward, and an optimum rolling window of four years is selected for analysing the time-varying characteristics of efficiency. It was found that the Indian stock market exhibited three distinct phases of efficiency and inefficiency across the research period, indicating a time-varying behaviour that supports the AMH. Structural break analysis was also done by using CUSUM of square, which also provides evidence in favour of the AMH. Furthermore, the market demonstrated the leverage effect, which indicated that bad news creates more volatility in the market than positive news of the same magnitude. The results show valuable insight to the policymakers, investors and traders to make more informed decisions.