Day-of-the-Week Effects among Mutual Funds
Journal article by Edward M. Miller, Larry J. Prather, M. Imtiaz Mazumder; Quarterly Journal of Business and Economics, Vol. 42, 2003
Journal Article Excerpt
Day-of-the-Week Effects among Mutual Funds. by Edward M. Miller , Larry J. Prather , M. Imtiaz Mazumder Introduction As discussed in the introductory article by Pettengill (2003), there is a large literature on the Monday effect. A day-of-the-week effect for a particular type of security exists if (1) the returns for that type of security are greater on some days of the week than others (a trading day effect), or (2) the returns on that security over a trading period are not proportional to the number of calendar days affected (a calendar day effect). Because returns for a given day are traditionally measured from the close of the previous trading day, Monday's returns would be computed from Friday's close to Monday's close, a period that includes three calendar days. As discussed in the introductory article, most research shows that Monday returns are radically different from other days of the week and are often negative. Therefore, most of the research on the day-of-the-week effect has focused on the Monday effect, this issue's subject. Monday is only one day of the week, however, and it is important to study the Monday effect in the context of possible differential returns for other days. This is one rationale for including data for days other than Monday in a Monday effect paper. This examination also provides one of this paper's contributions to the literature. Even though the existence of a Monday effect is intellectually interesting, it has been regarded as something that could not be traded profitably. The average weekend decline of 0.089 percent found by Siegel (1998) would amount to only $0.0445 for a $50 stock which is less than the bid-ask spread that prevailed during the period studied. As discussed i... |
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