HOLIDAY CLOSINGS AND SECURITY RETURNS

This paper documents unusual return patterns for securities around holiday closings. Returns for trading days immediately before holiday closings (pre‐holiday trading days) are unusually high regardless of weekday, year, or holiday closing. Returns for trading days following holiday closings (post‐holiday trading days) are high only if they occur at the end of the week. Tests indicate that pre‐holiday returns do not respond to a closing effect, and that the post‐holiday returns do not result from a time‐diffusion process. Holiday trading day returns question the tax‐loss selling explanation of the turn‐of‐the‐year effect and display a significant small firm effect outside of January.