Does Seasonal Pattern in Indian Stock Returns Contain a Unit Root?

This paper attempts to test for non-stationarity in the seasonal pattern of monthly stock returns in India. Using the HEGY methodology of seasonal unit roots on two monthly stock market indices viz., BSE sensitive Index and BSE 100 Index (1983:4?1999:12), the results of the study fail to confirm the presence of seasonal unit roots in the data. However, the findings indicate the presence of deterministic seasonality such as the ‘January effect’ and the ‘April effect’. Through a GARCH-M modelling, the study also confirms that the seasonal variation in market return is not due to any rational variation in market risk.