New moon day anomalies of “Amavasya” and “Muhurat” trading: Gestalting the role of culture and institutions

Abstract

We study the socio-cultural ecosystems, along with cross-country investments and global flow of foreign capital in a local milieu, India, having multiple stock exchanges and listed firms. India’s varied investor profiles exhibit a marked preference for certain “special” days given their religious beliefs. This study tests the abstinence hypothesis to examine the “new moon day” effect, considered inauspicious by the local dominant investing community, and the duality of minds, based on India’s annual festival, Diwali, considered auspicious to make invest ments and commence any wealth-generating activity (Muhurat trading). We find that the Indian markets generate a significant negative return on a Friday new moon day and a significant posi tive return on the Muhurat trading day. We propose a profit-making trading strategy that exploits the impact of the new moon day.