Explaining Monday Returns
The Monday effect is re-examined using two stock indices and a sample of 452 individual stocks that trade on the London Stock Exchange. The results based on conventional test methods reveal a low average return on Monday. Extending the analysis to examine the effects of various possible influences simultaneously, the average Monday return becomes positive and does not differ significantly from the average returns of most other days of the week. Fortnight, ex-dividend day, account period, (bad) news flow, trading activity and bid-ask spread effects are all controlled for. The results broadly support the trading time hypothesis.