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Risky short positions and investor sentiment: Evidence from the weekend effect in futures markets

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  • Vijay Singal
  • Jitendra Tayal

Abstract

This paper examines the weekend effect in futures markets and presents rational and behavioral reasons for its existence. Specifically, we document a weekend effect (Friday's return minus the following Monday's return) in futures markets. The weekend effect occurs partly because of asymmetric risk between long and short positions around weekends; the weekend effect increases when short positions are relatively more risky. In addition, we find that both lagged and contemporaneous changes in investor sentiment are related to the weekend effect. These results are consistent with the investor sentiment literature that finds that mood improves on Fridays but deteriorates on Mondays.

Suggested Citation

  • Vijay Singal & Jitendra Tayal, 2020. "Risky short positions and investor sentiment: Evidence from the weekend effect in futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(3), pages 479-500, March.
    • Handle: RePEc:wly:jfutmk:v:40:y:2020:i:3:p:479-500
    DOI: 10.1002/fut.22069
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