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Are there Monday effects in stock returns: a stochastic dominance approach

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  • Young-Hyun Cho
  • Oliver Linton
  • Yoon-Jae Whang

Abstract

We provide a test of the Monday effect in daily stock index returns. Unlike previous studies we define the Monday effect based on the stochastic dominance criterion. This is a stronger criterion than those based on comparing means used in previous work and has a well defined economic meaning. We apply our test to a number of stock indexes including large caps and small caps as well as UK and Japanese indexes. We find strong evidence of a Monday effect in many cases under this stronger criterion. The effect has reversed or weakened in the Dow Jones and S&P 500 indexes post 1987, but is still strong in more broadly based indexes like the NASDAQ, the Russell 2000 and the CRSP.

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File URL: http://eprints.lse.ac.uk/24520/
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 24520.

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Length: 29 pages
Date of creation: 29 Sep 2006
Date of revision:
Handle: RePEc:ehl:lserod:24520

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Keywords: Efficient markets; Stock market anomalies; Subsampling;

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References

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Citations

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Cited by:
  1. Robert Elliott & Ying Zhou, 2013. "State-owned Enterprises, Exporting and Productivity in China: A Stochastic Dominance Approach," The World Economy, Wiley Blackwell, vol. 36(8), pages 1000-1028, 08.
  2. McSweeney, Brendan, 2009. "The roles of financial asset market failure denial and the economic crisis: Reflections on accounting and financial theories and practices," Accounting, Organizations and Society, Elsevier, vol. 34(6-7), pages 835-848, August.
  3. Levy, Tamir & Yagil, Joseph, 2012. "The week-of-the-year effect: Evidence from around the globe," Journal of Banking & Finance, Elsevier, vol. 36(7), pages 1963-1974.
  4. Amélie Charles, 2010. "The day-of-the week effects on the volatility: The role of the asymmetry," Post-Print hal-00771136, HAL.
  5. Jorge Brusa & Rodrigo Hernandez & Pu Liu, 2011. "Reverse weekend effect, trading volume, and illiquidity," Managerial Finance, Emerald Group Publishing, vol. 37(9), pages 817-839, September.
  6. Jeffrey E. Jarrett, 2008. "Predicting Daily Stock Returns: A Lengthy Study of the Hong Kong and Tokyo Stock Exchanges," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 7(1), pages 37-51, April.
  7. Kaplanski, Guy & Levy, Haim, 2010. "Sentiment and stock prices: The case of aviation disasters," Journal of Financial Economics, Elsevier, vol. 95(2), pages 174-201, February.
  8. Annaert, Jan & Osselaer, Sofieke Van & Verstraete, Bert, 2009. "Performance evaluation of portfolio insurance strategies using stochastic dominance criteria," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 272-280, February.

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