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New findings regarding return autocorrelation anomalies and the importance of non-trading periods

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  • Josep Garcia Blandón
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    Abstract

    In this paper, differences in return autocorrelation across weekdays have been investigated. Our research provides strong evidence of the importance on non-trading periods, not only weekends and holidays but also overnight closings, to explain return autocorrelation anomalies. While stock returns are highly autocorrelated, specially on Mondays, when daily returns are computed on a open-to-close basis, they do not exhibit any significant level of autocorrelation. Our results are compatible with the information processing hypotheses as an explanation of the weekend effect.

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    File URL: http://www.econ.upf.edu/docs/papers/downloads/585.pdf
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    Bibliographic Info

    Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 585.

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    Date of creation: Nov 2001
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    Handle: RePEc:upf:upfgen:585

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    Web page: http://www.econ.upf.edu/

    Related research

    Keywords: Return autocorrelation; stock market anomalies; non-trading periods;

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    1. Rogalski, Richard J, 1984. " New Findings Regarding Day-of-the-Week Returns over Trading and Non-trading Periods: A Note," Journal of Finance, American Finance Association, vol. 39(5), pages 1603-14, December.
    2. Abraham, Abraham & Ikenberry, David L., 1994. "The Individual Investor and the Weekend Effect," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(02), pages 263-277, June.
    3. Campbell, John Y & Grossman, Sanford J & Wang, Jiang, 1993. "Trading Volume and Serial Correlation in Stock Returns," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 905-39, November.
    4. 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.
    5. Perry, Philip R., 1985. "Portfolio Serial Correlation and Nonsynchronous Trading," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 20(04), pages 517-523, December.
    6. Ritter, Jay R, 1988. " The Buying and Selling Behavior of Individual Investors at the Turn of the Year," Journal of Finance, American Finance Association, vol. 43(3), pages 701-17, July.
    7. Foster, F Douglas & Viswanathan, S, 1990. "A Theory of the Interday Variations in Volume, Variance, and Trading Costs in Securities Markets," Review of Financial Studies, Society for Financial Studies, vol. 3(4), pages 593-624.
    8. Dimson, Elroy & Marsh, Paul, 1986. "Event study methodologies and the size effect : The case of UK press recommendations," Journal of Financial Economics, Elsevier, vol. 17(1), pages 113-142, September.
    9. Bessembinder, Hendrik & Hertzel, Michael G, 1993. "Return Autocorrelations around Nontrading Days," Review of Financial Studies, Society for Financial Studies, vol. 6(1), pages 155-89.
    10. Admati, Anat R & Pfleiderer, Paul, 1989. "Divide and Conquer: A Theory of Intraday and Day-of-the-Week Mean Effects," Review of Financial Studies, Society for Financial Studies, vol. 2(2), pages 189-223.
    11. Lakonishok, Josef & Maberly, Edwin, 1990. " The Weekend Effect: Trading Patterns of Individual and Institutional Investors," Journal of Finance, American Finance Association, vol. 45(1), pages 231-43, March.
    12. Jaffe, Jeffrey F & Westerfield, Randolph, 1985. " The Week-End Effect in Common Stock Returns: The International Evidence," Journal of Finance, American Finance Association, vol. 40(2), pages 433-54, June.
    13. Josef Lakonishok, Seymour Smidt, 1988. "Are Seasonal Anomalies Real? A Ninety-Year Perspective," Review of Financial Studies, Society for Financial Studies, vol. 1(4), pages 403-425.
    14. 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.
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