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The evolution of the weekend effect in US markets

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  • Olson, Dennis
  • Mossman, Charles
  • Chou, Nan-Ting

Abstract

This paper applies cointegration and breakpoint analysis to test for the disappearance of the weekend effect in US stock markets. After its formal discovery in 1973, the weekend effect immediately declined, but subsequently went through periods of reappearance and even reversal. Unit root tests suggest stationarity in the Monday return differential from 1975 to the present. Our results support mean reversion toward the same return as for the other days of the week, rather than a wandering weekend effect. Breakpoint tests indicate a major change in return regimes within about two years of the discovery of the weekend effect, subsequent periods of adjustment that vary by index, and the long-run disappearance of the weekend effect.

Suggested Citation

  • Olson, Dennis & Mossman, Charles & Chou, Nan-Ting, 2015. "The evolution of the weekend effect in US markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 58(C), pages 56-63.
    • Handle: RePEc:eee:quaeco:v:58:y:2015:i:c:p:56-63
    DOI: 10.1016/j.qref.2015.01.005
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    References listed on IDEAS

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    3. Plastun, Alex & Sibande, Xolani & Gupta, Rangan & Wohar, Mark E., 2019. "Rise and fall of calendar anomalies over a century," The North American Journal of Economics and Finance, Elsevier, vol. 49(C), pages 181-205.
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    6. Badal Khan & Muhammad Aqil & Syed Hasnain Alam Kazmi & Syed Imran Zaman, 2023. "Day‐of‐the‐week effect and market liquidity: A comparative study from emerging stock markets of Asia†," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 544-561, January.
    7. Seif, Mostafa & Docherty, Paul & Shamsuddin, Abul, 2017. "Seasonal anomalies in advanced emerging stock markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 66(C), pages 169-181.
    8. Xiao Li & Bin Liu, 2021. "The Short-Selling Hypothesis of Weekend Effect and T + 1 Trading Mechanism," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(3), pages 449-467, September.
    9. Kim, Karam & Ryu, Doojin, 2022. "Sentiment changes and the Monday effect," Finance Research Letters, Elsevier, vol. 47(PB).

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    More about this item

    Keywords

    Weekend effect; Monday effect; Anomaly;
    All these keywords.

    JEL classification:

    • G - Financial Economics
    • G1 - Financial Economics - - General Financial Markets

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