Review of Quantitative Finance and Accounting, 23: 19–30, 2004
2004 Kluwer Academic Publishers. Manufactured in The Netherlands.
The Day-of-the-Week and the Week-of-the-Month
Effects: An Analysis of Investors’ Trading Activities
Department of Accounting, Economics and Finance, Texas A&M International University,
5201 University Boulevard, Laredo, Texas, 78041-1900, USA. Tel.: (956) 326-2511
Department of Finance, Sam M. Walton College of Business, University of Arkansas, Fayetteville,
Arkansas 72701, USA. Tel.: (501) 575-4505
Abstract. This study examines the positive Monday returns detected in the stock market during the 1988–1998
period and ﬁnds that (a) the positive Monday returns are concentrated in the ﬁrst and the third weeks of the month,
and (b) they are related to the increasing trading activities of institutional investors.
Keywords: weekend, Monday, reverse, investors, week-of-the-month
JEL Classiﬁcation: G1, G14
Previous studies of the “traditional” weekend effect—in which Monday stock returns are
signiﬁcantly negative and they are less than the returns on any other day of the week—show
that the effect is not evenly distributed across each week of the month. For instance, Liano
and Lindley (1995) report that negative Monday returns are concentrated only in the second
half of the month, and Wang, Li and Erickson (1997) ﬁnd that the effect exists only in the
fourth and ﬁfth week of the month.
More recently, Brusa, Liu and Schulman (2000, 2003), Mehdian and Perry (2001) and Gu
(2004) report that the weekend effect is reversed (i.e. Monday stock returns are signiﬁcantly
positive and they are higher than other days of the week). Furthermore, Mehdian and Perry
(2001) show that the mean Monday return of the ﬁrst three weeks of the month is signiﬁcantly
higher than that of the last two weeks of the month. Given that the “traditional” weekend
effect is not evenly distributed across each week of the month, and that the effect has been
reversed in recent years, it is logical to ask the question: Is the reverse weekend effect evenly
distributed across each week of the month or is the effect concentrated in certain weeks of
the month? The ﬁrst purpose of the paper is to answer the question. We ﬁnd that the positive
Monday returns are not evenly distributed; instead, they are concentrated in the ﬁrst and the
third weeks of the month.