Day of the Week Effects and Volatility in BRICS Stock Market Indices: An Empirical Study

Abstract: This paper aims to study the day of week effect in the stock markets in BRICS (Brazil, Russia, India, China and South Africa) countries. Data consist of closing prices (USD) of BRICS stock exchange indices. The time frame ranges from April, 2000 to March 2023. Initially, the study performs OLS regression analysis to examine predictable patterns in stock returns. Furthermore, to examine the volatility in returns, the study adopted Generalised Autoregressive Conditional Heteroskedastic (GARCH) models (GARCH, TGARCH, EGARCH) which allow variances of errors to be time dependent. Empirical results derived from the GARCH models for each country separately indicate the existence of day of the week effects on stock returns and volatility of the stock markets. Findings confirm the persistence of ARCH and GARCH effects in the daily return series. Moreover, the asymmetric GARCH models show that BRICS nations’ stock market returns exhibit asymmetric (leverage) effect. The presence of day of the week effects may suggest that BRICS stock markets are not efficient and there exists an opportunity to the traders for predicting the future prices and earning abnormal profits in the stock markets of BRICS countries. Keywords: Stock Markets, Day of the Week Effect, Asymmetric Effect, OLS Model, GARCH Models