Stock Returns and the Weekend Effect in Canada

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Stock Returns And The Weekend Effect In Canada

The existence of the weekend effect has been proven through different studies by Cross [4], French [7], Gibbons and Hess [8], Coats [2], Lakonishok and Levi [16], Hindmarch, Jentsch, and Drew [11], Keim and Stambaugh [15], Jaffe and Westerfield [12, 13], Jenkins [14], Dyl and Maberly [5, 6], and Chamberlain, Cheung and Kwan [1]. French [7] proved the existence of the weekend effect by testing both the trading and the calendar time hypotheses. Gibbons and Hess [8] verified the negative near return for Monday. Lakonishok and Levi [16] asserted that the weekend effect was primarily explained by settlement procedures and check clearing delays. However, Dyl and Maberly [5, 6] did not support Gibbons' and Hess's hypothesis and stated that settlement procedures did not affect the weekly pattern of returns. Keim and Stambaugh [15] supported French's findings where the negative average Monday returns were statistically significant. Jaffe and Westerfield [12, 13], after examining the stock returns in four different countries, found that the weekend effect did exist in each of them. They also investigated the settlement procedures and denied that these explained the negative Monday return or the positive Friday returns. Chamberlain, Cheung and Kwan [1] confirmed that Monday mean returns were not only negative, but they were also significantly different from mean returns for the other days of the week. Other U.S. studies that attempted to find the causes of the weekend effect phenomenon, but with no meaningful success, were done by Rogalski [18], Cornell [3], Harris [9, 10], and Smirlock and Starks [19]. Also, Loo [17] tried that in Canada.

The purpose of this paper is to determine the existence of the weekend effect in Canadian markets by studying this …