Another New Look at the Monday Effect

We link up the findings of Abraham and Ikenberry (1994) and Wang, Li and Erickson (1997) by showing that negative Monday returns concentrate on days 18 to 26 of a month and they can be completely explained in the statistical sense by the negative returns on the previous Friday. More importantly, we observe a 'week–four effect'. Not only the returns on Mondays but also returns on other days are lower during the fourth week of a month. We suggest that liquidity selling by individual investors may be the reason.