Seasonality and the Non-Trading Effect on Central-European Stock Markets
The analysis of seasonal patterns in the behavior of stock market returns has been of considerable interest during recent decades. The reason behind this curiosity remains clear: any predictable pattern in stock returns and variances may provide investors with returns in excess of the stock market average or from a specific portfolio benchmark. This paper focuses on one of the most common seasonal patterns, the so-called day-of-week effect. It has been observed in numerous studies that the distribution of stock returns may be different across the days of the week. Specifically, French and Keim and Stambaugh were among the first to confirm the weekend effect, or significantly low returns on Mondays. A similar pattern, although less pronounced and opposite in direction, was later confirmed by French and Roll who noticed a significant negative serial correlation in daily returns. In a more recent study, Baillie and Bollerslev report that daily stock return volatility tends to be higher following non-trading days. (fragment of text)
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