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Does the day of the week effect exist once transaction costs have been accounted for? Evidence from the UK

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Author Info
A. Gregoriou
A. Kontonikas
N. Tsitsianis

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Abstract

This article investigates the day of the week anomaly in the FTSE 100 Share Index over an 11-year time period from 1 January 1986 to 31 December 1997. Its focus is to assess whether the day of the week effect continues to persist once transactions costs are considered. Unlike previous literature it uses the bid-ask spread as a proxy for transactions costs. It finds that once returns become robust to transactions costs the anomaly appears to fade away. It then extends the research by looking at the time-varying volatility of stock returns with use of a GARCH model. The GARCH results further support the fact that transaction costs appear to die away the day of the week anomaly in the UK Stock market.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Applied Financial Economics.

Volume (Year): 14 (2004)
Issue (Month): 3 (February)
Pages: 215-220
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Handle: RePEc:taf:apfiec:v:14:y:2004:i:3:p:215-220

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Lakonishok, Josef & Levi, Maurice, 1982. " Weekend Effects on Stock Returns: A Note," Journal of Finance, American Finance Association, vol. 37(3), pages 883-89, June. [Downloadable!] (restricted)
  2. Keim, Donald B & Stambaugh, Robert F, 1984. " A Further Investigation of the Weekend Effect in Stock Returns," Journal of Finance, American Finance Association, vol. 39(3), pages 819-35, July. [Downloadable!] (restricted)
  3. French, Kenneth R., 1980. "Stock returns and the weekend effect," Journal of Financial Economics, Elsevier, vol. 8(1), pages 55-69, March. [Downloadable!] (restricted)
  4. Thaler, Richard H, 1987. "Seasonal Movements in Security Prices II: Weekend, Holiday, Turn of the Month, and Intraday Effects," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 169-77, Fall. [Downloadable!] (restricted)
  5. Aggarwal, Raj & Rao, Ramesh P & Hiraki, Takato, 1989. "Skewness and Kurtosis in Japanese Equity Returns: Empirical Evidence," Journal of Financial Research, Southern Finance Association and Southwestern Finance Association, vol. 12(3), pages 253-60, Fall.
  6. Tim Bollerslev & Jeffrey Wooldridge, 1992. "Quasi-maximum likelihood estimation and inference in dynamic models with time-varying covariances," Econometric Reviews, Taylor and Francis Journals, vol. 11(2), pages 143-172. [Downloadable!] (restricted)
  7. Tim Bollerslev & Jeffrey M. Wooldridge, 1988. "Quasi-Maximum Likelihood Estimation of Dynamic Models with Time-Varying Covariances," Working papers 505, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Thaler, Richard H, 1987. "The January Effect," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 197-201, Summer. [Downloadable!] (restricted)
  9. Rogalski, Richard J, 1984. " A Further Investigation of the Weekend Effect in Stock Returns," Journal of Finance, American Finance Association, vol. 39(3), pages 835-37, July. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mahendra Chandra, 2006. "The day-of-the-week effect in conditional correlation," Review of Quantitative Finance and Accounting, Springer, vol. 27(3), pages 297-310, November. [Downloadable!] (restricted)
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