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Trading Returns for the Weekend Effect Using Intraday Data
Author(s) -
Chow Edward H.,
Hsiao Ping,
Solt Michael E.
Publication year - 1997
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00113
Subject(s) - weekend effect , dividend , names of the days of the week , transaction cost , transaction data , economics , econometrics , trading strategy , financial economics , database transaction , business , monetary economics , finance , database , computer science , medicine , emergency medicine , linguistics , philosophy
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.