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The Day-of-the-Week Effect Revisited: An Alternative Testing Approach

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Author Info
Alt, Raimund (Department of Economics and Finance, Institute for Advanced Studies, Vienna)
Fortin, Ines (Department of Economics and Finance, Institute for Advanced Studies, Vienna)
Weinberger, Simon
Abstract

This paper questions traditional approaches for testing the day-of-the-week effect on stock returns. We propose an alternative approach based on the closure test principle introduced by Marcus, Peritz and Gabriel (1976), which has become very popular in Biometrics and Medical Statistics. We test all pairwise comparisons of daily expected stock returns, while the probability of committing any type I error is always kept smaller than or equal to some prespecified level a for each combination of true null hypotheses. We confirm day-of-theweek effects for the S&P 500, the FTSE 30 and the DAX 30 found in earlier studies, but find no evidence for the 1990's.

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File URL: http://www.ihs.ac.at/publications/eco/es-127.pdf
File Format: application/pdf
File Function: First version, 2002
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Publisher Info
Paper provided by Institute for Advanced Studies in its series Economics Series with number 127.

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Length: 29 pages
Date of creation: Nov 2002
Date of revision:
Handle: RePEc:ihs:ihsesp:127

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Related research
Keywords: Day-of-the-week effect Multiple hypotheses testing Multiple comparisons Closed test procedures Multiple level a test

Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies

References listed on IDEAS
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  1. Greenstone, Michael & Oyer, Paul, 2000. " Are There Sectoral Anomalies Too? The Pitfalls of Unreported Multiple Hypothesis Testing and a Simple Solution," Review of Quantitative Finance and Accounting, Springer, vol. 15(1), pages 37-55, July. [Downloadable!] (restricted)
  2. Savin, N.E., 1984. "Multiple hypothesis testing," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 14, pages 827-879 Elsevier. [Downloadable!] (restricted)
  3. Chow, K. Victor & Denning, Karen C., 1993. "A simple multiple variance ratio test," Journal of Econometrics, Elsevier, vol. 58(3), pages 385-401, August. [Downloadable!] (restricted)
  4. Huber, Peter, 1997. "Stock Market Returns in Thin Markets: Evidence from the Vienna Stock Exchange," Applied Financial Economics, Taylor and Francis Journals, vol. 7(5), pages 493-98, October. [Downloadable!] (restricted)
  5. Neusser, Klaus, 1991. "Testing the long-run implications of the neoclassical growth model," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 3-37, February. [Downloadable!] (restricted)
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  6. Madlener, Reinhard & Alt, Raimund, 1996. "Residential Energy Demand Analysis: An Empirical Application of the Closure Test Principle," Empirical Economics, Springer, vol. 21(2), pages 203-20.
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This page was last updated on 2008-9-17.

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