The Individual Investor and the Weekend Effect

It is well known that stock returns, on average, are negative on Mondays. Yet, it is less well known that this finding is substantially the consequence of returns in prior trading sessions. When Friday's return is negative, Monday's return is negative nearly 80 percent of the time with a m...

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Bibliographic Details
Published in:Journal of financial and quantitative analysis 1994-06, Vol.29 (2), p.263-277
Main Authors: Abraham, Abraham, Ikenberry, David L.
Format: Article
Language:English
Subjects:
Brokerages
Common stock
Economic theory
Financial economics
Investment
Investors
Liquidity
Quantitative analysis
Rates of return
Recommendations
Securities trading
Statistical analysis
Stock exchange
Stock exchanges
Stock market indices
Stock prices
Stock returns
Studies
Trade
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Summary:It is well known that stock returns, on average, are negative on Mondays. Yet, it is less well known that this finding is substantially the consequence of returns in prior trading sessions. When Friday's return is negative, Monday's return is negative nearly 80 percent of the time with a mean return of −0.61 percent. When Friday's return is positive, the subsequent Monday's mean return is positive, 0.11 percent. This relationship is stronger than for any other pair of trading days and is most acute in small- and medium-size companies. The trading behavior of individual investors appears to be at least one factor contributing to this pattern. Individual investors are more active sellers of stock on Mondays, particularly following bad news in the market.
ISSN:0022-1090
1756-6916
DOI:10.2307/2331225