Daily Returns Seasonality and Impact of Stock Index Futures: Evidence From The Kuala Lumpur Stock Exchange

Abstract

This paper examines the impact of Stock Index Futures (SIF) trading on Day of Week (DOW) daily KLSE returns. We address a total of four research questions using both a simple and a GARCH (1,1) specification. Three daily return measures, CTC, OTC and CTO The impact on DOW pattern of the new T+3 day settlement is also examined. in previous siudies, we see evidence of a DOW pattern in daily stock returns prior to SIF introduction. However, in the period following SIF introduction the diminishes. The null hypothesis that mean daily returns are equal across the week rejected. The T+3 Day settlement rule also had an impact on stock market DOW Between SIF and trading rule change. we find that while the SIF introduction reduced effect substantially, the T+3 implementation eliminated even the marginal individual