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Do good and bad news affect the day of the week effect? An analysis of the KSE-100 Index

Author

Listed:
  • Shahid Raza

    (Harbin Institute of Technology)

  • Sun Baiqing

    (Harbin Institute of Technology)

  • Imtiaz Hussain

    (Pakistan Institute of Development Economics)

  • Pwint Kay-Khine

    (Harbin Institute of Technology)

Abstract

Good and bad news plays a crucial role in the stock market, significantly influencing investor sentiment, market expectations, and trading decisions. Positive news can boost market confidence and upward price movements. On the contrary, negative news can erode investor confidence and cause downward price movements. This study examines the impact of good and bad news on the effect of day-of-week in the Pakistan stock market, which has been largely overlooked in previous research focusing mainly on macro factors. The study applies different ARCH and GARCH models to investigate the influence of news and day-of-week patterns on stock market outcomes. The findings reveal a significant day-of-week effect, with the highest returns on Friday and the lowest returns on Monday. The negative shock has a more substantial impact than the positive shock, contributing to high future volatility, and bad news has a more significant influence than good news. The study highlights the role of news and day-of-week patterns in shaping stock market outcomes and fills the gap in previous research by emphasizing the importance of these factors.

Suggested Citation

  • Shahid Raza & Sun Baiqing & Imtiaz Hussain & Pwint Kay-Khine, 2023. "Do good and bad news affect the day of the week effect? An analysis of the KSE-100 Index," SN Business & Economics, Springer, vol. 3(7), pages 1-22, July.
    • Handle: RePEc:spr:snbeco:v:3:y:2023:i:7:d:10.1007_s43546-023-00491-8
    DOI: 10.1007/s43546-023-00491-8
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