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Weekday seasonality of stock returns: The contrary case of China

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  • Ali, Fahad
  • Ülkü, Numan

Abstract

We document that Chinese stock returns exhibit early-in-the-week effects opposite-signed to those observed worldwide. The period of analysis is 2001–2016. Dominated by individual investors, Chinese stock markets offer unique out-of-sample insight regarding the source of weekday seasonality, ascribed elsewhere to institutional investors’ trading patterns. High returns to the market and to small, speculative stocks early-in-the-week pose a refuter to the mood explanation for the conventional (negative) Monday effect. A battery of tests suggests that the patterns in the Market, SMB, and RMW factors are jointly associated with Chinese individual investors whose demand is tilted towards small, speculative stocks. Our findings point to a potential role of dominant investor type in driving weekday patterns and the RMW premium.

Suggested Citation

  • Ali, Fahad & Ülkü, Numan, 2020. "Weekday seasonality of stock returns: The contrary case of China," Journal of Asian Economics, Elsevier, vol. 68(C).
  • Handle: RePEc:eee:asieco:v:68:y:2020:i:c:s1049007820300452
    DOI: 10.1016/j.asieco.2020.101201
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    More about this item

    Keywords

    Weekday patterns in stock returns; Fama-French five-factors; RMW factor; Chinese stock market;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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