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Reversal of Monday returns: It is the afternoon that matters

This study dissects the well-known Monday return reversal by separating the Monday into a morning and afternoon period. So far, the literature on the Monday return reversal is limited to the analysis of daily, primarily market returns. Using a large cross-section of U.S. intraday stock return data f...

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Bibliographic Details
Published in:Finance research letters 2024-07, Vol.65, p.105525, Article 105525
Main Authors: Pigorsch, Uta, Schäfer, Sebastian
Format: Article
Language:English
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Summary:This study dissects the well-known Monday return reversal by separating the Monday into a morning and afternoon period. So far, the literature on the Monday return reversal is limited to the analysis of daily, primarily market returns. Using a large cross-section of U.S. intraday stock return data from 2007 to 2022, we find that only Monday afternoon but not morning returns reverse over the rest of the week. The effect is stronger for larger firms and not explained by common risk factors or earnings announcements. It is mostly prevalent for those stocks for which investor disagreement is high on Monday. •We find a significant reversal of Monday afternoon returns over the remaining week.•There is no such reversal for Monday morning returns.•Thus, the previously reported Monday return reversal is due to the afternoon.•A long-short portfolio based on Monday afternoon returns is highly profitable.•Preliminary results show that the Monday afternoon reversal is due to disagreement.
ISSN:1544-6123
DOI:10.1016/j.frl.2024.105525