Day of the week and the cross-section of returns

By Justin Birru. Journal of Financial Economics, 2018

131 citations recorded by the source corpus.

This paper documents a new empirical fact. Long-short anomaly returns are strongly related to the day of the week. Anomalies for which the speculative leg is the short (long) leg experience the highest (lowest) strategy returns on Monday. The exact opposite pattern is observed on Fridays. The effects are large; Monday (Friday) alone accounts for over 100% of monthly returns for all anomalies examined for which the short (long) leg is the speculative leg. Consistent with a mispricing explanation, the pattern is fully driven by the speculative leg of the strategy. The observed patterns are consistent with the abundance of evidence in the psychology literature documenting that mood increases from Thursday to Friday and decreases on Monday.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/e52b9f8432133b9a24b24acc39231a0e338663be

Citations in the corpus

• Psychology-based Models of Asset Prices and Trading Volume (2018, unknown): “30Building on evidence that, on average, a person’s mood improves as the week progresses from Monday to Friday, Birru (2018) predicts that speculative stocks – stocks that are hard to value or to arbitrage – will perform well (poorly) relative to non-speculative stocks on Fridays (Mondays).”