"Reverse" weekend effect: the U.S. Market vs. International Markets

Abstract

In a recent study, Brusa, Liu, and Schulman ( 1998) detected a "reverse" weekend effect in the recent US. market - whereas average Monday returns arc positive for several indexes. 1n this paper we reexamine the "traditional" and "reverse" weekend effects in the U S and in foreign stock markets. The results of our study indicate that the "reverse" weekend effect is a unique feature of the stock market in the United States. During the time the U.S. stock market exhibits the "reverse" weekend effect, all the foreign stock markets show either the "traditional" weekend effect or the lack of any type of effect The difference in Monday return between the U.S. market and other international markets persist even after we sort the data by week of the month and by month of the year Furthermore, we find that during the recent period, Monday returns in foreign markets tend to follow previous Friday return only if the return only if the return on previous Friday was negative Monday returns in foreign markets are not different from zero if the return on previous Friday was positive The results observed in the U.S. stock market, however, are exactly the opposite of those observed in foreign markets. Monday returns in the US. tend to follow previous Friday return only if the return on previous Friday was positive. Monday returns are not different from zero if the return on the previous Friday was negative. The difference in the Friday-Monday return autocorrelation between the US. and foreign markets reinforce the finding that the "reverse" weekend effect is a unique feature only observed in the US stock market.