Weekend Effect on Stock Prices - 2: Finance Trading Times

Weekend Effect on Stock Prices - 2

Continuing further from the first part of this article on Weekend Effect on Stock Prices, here is the second part:

However, the weekend effect has been prominent only in the US & UK stock market along with Japan, while it is completely absent in the other stock markets like Singapore, Malaysia and Philippines.



The case of Japan is an interesting one, because Japan allows Saturday trading during the period of observation of this stock market data. The presence of a strong weekend effect in Japan, which allowed Saturday trading for a portion of the period studies here indicates that there might be a more direct reason for negative returns on Mondays than bad information over the weekend.

Here is something more interesting:
The negative returns on Mondays cannot be justified for a reason of the absence of trading over the weekend. The returns on days following trading holidays, in general, are characterized by positive, not negative, returns – which is completely contradictory to what we observe in case of Monday effect.

Here is a graph showing the returns following the holidays in US – where the weekend effect has been most prominent:



As we can observe from the graph above, the holiday effect has been prominent for positive returns in case of most of the US holidays – except for American Independence day (4th July). The return on 5th July is negative, but still very low compared to the positives that we observe on other days following holidays.

So what can be concluded from these findings and observations?
I really don’t know. The data that is used in the above studies dates back to 1927.
What has happened in the past may not repeat in future. What has happened in USA may not happen in other countries of the world.

Give it a shot – offcourse with your luck. And hope to be lucky! :- )
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