Day-of-the-week and weekend effects on stock market returns: an investigation through review of literature

Abstract

The weak-form of market efficiency states that stock price reflects all the historical price data thus abnormal return cannot be earned based on historical price. Many studies observed a pattern in generating returns over the week, where Fridays have been documented as a day providing significantly higher returns while Mondays as a day providing the lowest or negative return. The presence of a such pattern in the return violates the efficient market hypothesis in the weak form which provide a golden opportunity for smart and knowledgeable investors to exploit such a pattern and generate an abnormal return. This paper tries to critically review and synthesize the relevant research in the field of the days of the week and weekend effect by using a systematic literature review approach, from 1973 to 2023. This study concluded that the direction and magnitude of the days-of-the-week and weekend effects, for different stock markets across different periods are not the same, it may be due to different institutional arrangements, and religious and cultural beliefs.

Keywords

• days of the week anomaly
• efficient market hypothesis
• monday effect
• calendar anomalies
• secondary market
• trend and present status