Weekend Effect, 'Reverse' Weekend Effect, and Investor Trading Activities

Abstract:   In this study, we document evidence of a 'reverse' weekend effect – whereby Monday returns are significantly positive and they are higher than the returns on other days of the week – over an extended period of eleven years (from 1988 to 1998). We also find that the 'traditional' weekend effect and the 'reverse' effect are related to firm size in that the 'traditional' weekend effect tends to be associated with small firms while the 'reverse' weekend effect tends to be associated with large firms. In addition, we find that during the period in which the 'reverse' weekend effect is observed, Monday returns for large firms tend to follow previous Friday returns when previous Friday returns are positive , but they do not follow the previous Friday returns when Friday returns are negative . Furthermore, we find that during the period in which the 'reverse' weekend effect is observed, Monday returns are positively related to the volume of medium‐size and block transactions, but negatively related to the volume of odd‐lot transactions.     

The Weekend Effect, 'Reverse' Weekend Effect, and Firm Size

In this paper, we find a 'reverse%rsquo; weekend effect — whereby returns for Monday are positive and significantly greater than returns for the preceding Friday — in recent data for major stock indexes. We also find that, while a weak weekend effect exists in portfolios of smaller firms, the effect begins to diminish and weak 'reverse' weekend effect begins to appear in medium size firms. The 'reverse' weekend effect becomes strong and statistically significant in portfolios of large firms. The detection of a 'reverse' weekend effect in portfolios of large firms is a new finding in the literature.     

Weekend gold returns in bull and bear markets

This study examines the weekend effect in gold returns during bull and bear markets over the period 1975 through 2011. It shows that gold returns from close on Friday to close on Monday are significantly lower than returns during the rest of the week. This result is due largely to gold returns during bear markets. During gold bull markets, gold weekend returns are not significantly different from weekday returns. The study shows that the effect has substantial economic implications for gold investors. The effect is shown to be related to a significantly negative skewness in the weekend returns.     

The “reverse” weekend effect: the U.S. market versus international markets

In this paper we find that the “reverse” weekend effect—where average Monday returns tend to be positive—is a unique feature of the U.S. market. During the time the U.S. market exhibits the reverse weekend effect, foreign markets still show the “traditional” weekend effect or no effect at all. The results persist even after we sort the data by week of the month and month of the year. We also find that in foreign markets negative Monday returns tend to follow negative Friday returns. However, in the U.S. market, positive Monday returns tend to follow positive Friday returns.     

The Reversing Weekend Effect: Evidence from the U.S. Equity Markets

The well-known weekend effect has been reversing in Major U.S. indices from late 1980s to late 1990s. The correlation between Monday and Friday returns also exhibited a declining trend, and fluctuated around zero in the 1990s. A power ratio method is developed to measure consistently the relative contribution of Friday and Monday returns to the return of the week in each individual year. The revealed dynamics of the anomaly explains why previous researchers report different or conflicting findings. The anomaly may not be necessarily related to firm size.     

Day‐of‐the‐Week Effect in High Moments

Evidence from equity markets worldwide indicates that the Day‐of‐the‐Week anomaly appears to fade from the first moment of the distribution of daily returns. We report highly significant pair‐wise weekend effects in high moments when comparing the first and last trading days of the week. The second moment alone appears to distinguish the return distribution of the first trading day from all others. A probable explanation of the phenomena appears to be information dissemination: corporate announcements released after closing of the last trading day of the week spill‐over to the opening of the first trading day, increasing its variability and carrying the closing sign.     

Short Selling and the Weekend Effect for NYSE Securities

Using short-sale transactions data, we examine the relation between short selling and the weekend effect. We do not find that short selling is more abundant on Monday than on Friday, even for stocks that have higher Friday returns. We find that short sellers execute more short-sale volume during the middle of the week, and that the positive correlation between short selling and returns on Monday is greater, on average, than the correlation on the other days of the week. Our results are robust to subsamples of stocks with larger weekend effects and stocks that do not have listed options.     

A Further Investigation of the Weekend Effect in Stock Returns

This study uses a longer time period and additional stocks to further investigate the weekend effect. We find consistently negative Monday returns (1) for the S & P Composite as early as 1928, (2) for Exchange-traded stocks of firms of all sizes, and (3) for actively traded over-the-counter (OTC) stocks. The OTC results are based on bid prices and therefore appear to reject specialist-related explanations. For the 30 individual stocks of the Dow Jones Industrial Index, the average correlation between Friday and Monday returns is positive and the highest of all pairs of successive days. The latter finding is inconsistent with fairly general measurement-error explanations.     

A New Look at the Monday Effect

It is well documented that expected stock returns vary with the day-of-the-week (the Monday or weekend effect). In this article we show that the well-known Monday effect occurs primarily in the last two weeks (fourth and fifth weeks) of the month. In addition, the mean Monday return of the first three weeks of the month is not significantly different from zero. This result holds for most of the subperiods during the 1962–1993 sampling period and for various stock return indexes. The monthly effect reported by Ariel (1987) and Lakonishok and Smidt (1988) cannot fully explain this phenomenon.     

Operating Performance and Stock Returns of Firms Calling Convertible Preferred Stocks

Abstract:   Using methodologies developed by Barber and Lyon (1996 and 1997 ), we examine the long‐run operating performance and stock returns of firms around in‐the‐money calls of convertible preferred stock. Our study intends to be a direct test of the hypothesis that managers call in‐the‐money convertibles when they view a decline in the firms' performance. We find no evidence that calling firms underperform non‐calling benchmark firms. On the contrary, we find mild evidence that the post‐call operating performance of calling firms is better than a carefully selected group of benchmark firms and call firms' post‐call stock returns are no worse than benchmark firms.     

Seasonal and Day-of-the-Week Effects in Four Emerging Stock Markets

The “January effect” and the “weekend effect” have proven to be persistent anomalies in U.S. equity markets. The objective of this paper is to examine seasonal and daily patterns in equity returns of four emerging markets: Hong Kong, Singapore, Malaysia, and the Philippines. These markets are gaining importance with the globalization of business; therefore, it is necessary to examine the efficiency and functioning of these capital markets. Our analysis uses daily data for the 12 years from September 1, 1976, to June 30, 1988. The results support the existence of a seasonal pattern in these markets. Returns in the month of January are higher than any other month for all markets examined except the Philippines. A robust day-of-the-week effect is also found. These markets exhibit a weekend effect of their own in the form of low Monday returns. In addition, there exists a strong “Tuesday effect,” which may be related to the + 13 hour time difference between New York and these emerging markets.     

Short Selling and the Weekend Effect in Nasdaq Stock Returns

We examine daily short selling of Nasdaq stocks to explore whether speculative short selling causes a significant portion of the weekend effect in returns. We identify a weekend effect in speculative short selling whereby it constitutes a larger percentage of trading volume on Mondays versus Fridays. We find an opposite effect in dealer short selling, consistent with market makers adding liquidity and stability. Our main finding is that speculative short selling does not explain an economically meaningful portion of the weekend effect in returns, even among the firms most that are most actively shorted. This finding contradicts some prior studies.     

A note on weekday, intraday, and overnight patterns in the interbank foreign exchange and listed currency options markets

Transactions data are used to investigate returns patterns for close-to-close, close-to-open, and intraday long positions in spot currency (interbank) and currency put options (listed) for the years 1983 through 1988. Both trading-day and calendar-day hypotheses are investigated. Under the former, spot market returns are found to be significantly higher from Friday close to Monday close and from Friday close to Monday open. Under the calendar-day hypothesis, however, no significant close-to-close pattern emerges, and the Friday close to Monday open effect is reversed. Finally, spot (put) market returns are found to be significantly lower (higher) for Tuesday and Friday afternoons.     

The wandering weekday effect in major stock markets

This paper reports a wandering weekday effect: the pattern of day seasonality in stock market returns is not fixed, as assumed in the Monday or weekend effects, but changes over time. Analysing daily closing prices in eleven major stock markets during 1993–2007, our results show that the wandering weekday is not conditional on average returns in the previous week (the “twist” in the Monday effect). Nor does it diminish through the period of analysis. The results have important implications for market efficiency, and help to reconcile mixed findings in previous studies, including the reported disappearance of the weekday effect in recent years.     

GOOD NEWS, BAD NEWS, VOLUME, AND THE MONDAY EFFECT

New evidence is presented on the nature of the Monday effect in stock market returns. Using stock returns for the years 1962-1986, the Monday effect is found to be confined to periods of negative market returns. Monday's returns are no different from other weekday returns in periods of positive returns. In addition, trading volume and the Monday effect are related. Monday's volume is lower than the other weekdays. When returns are compared controlling for trading volume, we find that the Monday effect is confined to negative return periods with above normal volume, which represent only two per cent of the sample period.     

INTERNATIONAL EVIDENCE ON WEEKEND ANOMALIES

Recent studies on the U.S. market find that the Monday effect is observed mainly when the return on the previous Friday is negative or when the Monday falls within the last two weeks of the month. I look for international evidence and examine whether such properties of the Monday effect are related to another anomalous phenomenon—high weekend correlation. By examining twenty‐three equity market indexes, I find that the negative Friday is, in general, important to the Monday effect. Furthermore, Monday returns tend to be lowest on the fourth week of the month. Although high weekend correlation is also common to these markets, it seems not related to the bad‐Friday factor and shows no seasonality across weeks of the month. JEL classification: G15, G10.     

The Day-of-the-Week and the Week-of-the-Month Effects: An Analysis of Investors' Trading Activities

This study examines the positive Monday returns detected in the stock market during the 1988–1998 period and finds that (a) the positive Monday returns are concentrated in the first and the third weeks of the month, and (b) they are related to the increasing trading activities of institutional investors.     

Glamour Acquirers, Method of Payment and Post‐acquisition Performance: The UK Evidence

We study the effect of different acquirer types, defined by financial status and their payment methods, on their short and long‐term performance, in terms of abnormal returns using a variety of benchmark models. For a sample of 519 UK acquirers during 1983–95, we examine the abnormal return performance of acquirers based on their pre‐bid financial status as either glamour or value acquirers using both the price to earnings (PE) ratio and market to book value ratio (MTBV). Value acquirers outperform glamour acquirers in the three‐year post‐acquisition period. One interpretation is that glamour firms have overvalued equity and tend to exploit their status and use it more often than cash to finance their acquisitions. As we move from glamour to value acquirers, there is a greater use of cash. Our results are broadly consistent with those for the US reported by Rau and Vermaelen (1998). However, in contrast to their study, we find stronger support for the method of payment hypothesis than for extrapolation hypothesis. Cash acquirers generate higher returns than equity acquirers, irrespective of their glamour/ value status. Our conclusions, based on four benchmark models for abnormal returns, suggest that stock markets in both the US and the UK may share a similar proclivity for over‐extrapolation of past performance, at least in the bid period. They also tend to reassess acquirer performance in the post‐acquisition period and correct this overextrapolation. These results have implications for the behavioural aspects of capital markets in both countries.     

Trading Returns for the Weekend Effect Using Intraday Data

The existence of the weekend effect has been documented as early as 1885. This paper examines whether the serial dependence in returns around weekends and the magnitude of negative Friday returns can be used to produce superior trading returns. We find some success for this endeavor after accounting for transaction costs (including the bid/ask spread), especially when trading is confined to weekends for which there are large negative Friday returns and to positions opened on Friday afternoons. The effect of stocks trading ex-dividend on Mondays does not appear to bias our results.     

The Reversal of the Monday Effect: New Evidence from US Equity Markets

This article re-examines the Monday effect in the US stock market from 1964–1999 using daily returns from three large-cap indexes and two small-cap indexes. In the period before 1987, Monday returns are significantly negative in all five US stock indexes, confirming previous empirical findings. In the post-1987 period, we uncover a significant reversal of the Monday effect in the large-cap indexes (NYSE, S&38;P500 and DJCOMP), since Monday returns are significantly positive. Furthermore, significant differences in the persistence and reversal of the Monday effect are found between large-cap and small-cap stock indexes.