The day-of-the-week effect and asymmetrical behavior in the Hang Seng index

Abstract

This study examines the existence of a daily pattern of calendar anomalies and asymmetrical behaviour in the Hong Kong stock market over the period 2000 to 2006. This study finds the existence of Friday effect in the return of Hang Seng Index due to the varying market volatility. Further analysis using the TGARCH, EGARCH and EGARCH - M models uncovered that there appear asymmetrical market reaction on the positive and negative news, rendering doubts about the appropriateness of the previous research that employed the symmetric GARCH models in their analysis of calendar anomalies. It is believed that the consistent of these findings have useful implications for trading strategies and investment decisions. Thus, Investor should use the day-of- the-week effect information to avoid and reduce the risk when investing in the Hong Kong stock market.