Do Festival Seasons Boost Share Prices? Evidence from Indian Stock Market Trading Patterns

G.Prasanna Kumar , K.Siva , P.V.S Swamy

Pages: 1-9

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Abstract:

The purpose of this research is to determine if there are certain short-horizon market patterns for each of the festival seasons within India. The data was collected using a quasi-experimental calendar event design from January 2010 through December 2024. Trading days were divided into three categories for both the broad market and sector index: before, during and after each festival season. These three categories were then used to calculate returns, realized volatility and turnover for each category relative to their respective matched control periods of non-festival days. Results indicated an identifiable pre-festival period of lower volatility with small, statistically insignificant increases in average daily returns; however, both returns and volatility during and after the festivals decreased. These results suggest that festival seasons create a more consistent near-term risk environment compared to creating consistent expected returns, which supports models based on attention and sentiment, where the increased attention creates a calming effect on trading but does not provide sufficient premium to warrant significant investment or strategy development. Limitations to this study include daily frequency (excluding micro-structure at the intra-day level) and discrete window definitions that may not accurately capture the cycle of anticipation surrounding the festival season. The practical application of these findings are related to managing risk and operating markets: Position size and liquidity provision may be adjusted around anticipated low volatility periods.

Keywords:

Festival Seasons, Holiday Anomalies, Volatility Compression, Event Study, Indian Equities, Investor Sentiment.

DOI URL:- https://doi.org/10.55524/irmss.2025.1.1.1