Trading Returns for the Weekend Effect Using Intraday Data

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Abstract

The existence of the weekend effect has been documented as early as 1885. This paper examines whether the serial dependence in returns around weekends and the magnitude of negative Friday returns can be used to produce superior trading returns. We find some success for this endeavor after accounting for transaction costs (including the bid/ask spread), especially when trading is confined to weekends for which there are large negative Friday returns and to positions opened on Friday afternoons. The effect of stocks trading ex-dividend on Mondays does not appear to bias our results.

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