Returns by Weekday

The Weekend Effect: Explanations

First, the Monday effect is really a weekend effect since the bulk of the negative returns is manifested in the Friday close to Monday open returns. The returns from intraday returns on Monday are not the culprits in creating the negative returns.

Second, the Monday effect is worse for small stocks than for larger stocks. Third, the Monday effect is no worse following three-day weekends than two-day weekends.

There are some who have argued that the weekend effect is the result of bad news being revealed after the close of trading on Friday and during the weekend. Even if this were a widespread phenomenon, the return behavior would be inconsistent with a rational market, since rational investors would build in the expectation of the bad news over the weekend into the price before the weekend, leading to an elimination of the weekend effect.

The Weekend Effect in International Markets

Further Notes on the Weekend Effect

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.

As a final note, the negative returns on Mondays cannot be just attributed to the absence of trading over the weekend. The returns on days following trading holidays, in general, are characterized by positive, not negative, returns.

The Holiday Effect: Is there one?

Prof. Aswath Damodaran