A New Look at the Monday Effect

Authors

  • KO WANG,

  • YUMING LI,

  • JOHN ERICKSON

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    • Wang is from the Chinese University of Hong Kong and California State University-Fullerton, and Li and Erickson are from California State University-Fullerton, Fullerton, California. We acknowledge helpful comments from Su Han Chan, George Gau, Tsong Yue Lai, Larry Lang, John Martin, and Leslie Young. We thank an anonymous referee and the editor, who provided specific comments that greatly improved the article. The usual disclaimer applies.


ABSTRACT

It is well documented that expected stock returns vary with the day-of-the-week (the Monday or weekend effect). In this article we show that the well-known Monday effect occurs primarily in the last two weeks (fourth and fifth weeks) of the month. In addition, the mean Monday return of the first three weeks of the month is not significantly different from zero. This result holds for most of the subperiods during the 1962–1993 sampling period and for various stock return indexes. The monthly effect reported by Ariel (1987) and Lakonishok and Smidt (1988) cannot fully explain this phenomenon.

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