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Risky short positions and investor sentiment: Evidence from the weekend effect in futures markets
Author(s) -
Singal Vijay,
Tayal Jitendra
Publication year - 2020
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.22069
Subject(s) - weekend effect , futures contract , mood , economics , financial economics , behavioral economics , names of the days of the week , monetary economics , psychology , finance , medicine , social psychology , linguistics , emergency medicine , philosophy
Abstract This paper examines the weekend effect in futures markets and presents rational and behavioral reasons for its existence. Specifically, we document a weekend effect (Friday's return minus the following Monday's return) in futures markets. The weekend effect occurs partly because of asymmetric risk between long and short positions around weekends; the weekend effect increases when short positions are relatively more risky. In addition, we find that both lagged and contemporaneous changes in investor sentiment are related to the weekend effect. These results are consistent with the investor sentiment literature that finds that mood improves on Fridays but deteriorates on Mondays.