Using Annual Panel Data To Examine The Monday Effect

Abstract

The Monday effect is a well-known anomaly in which Monday stocks returns are significantly different from other days. Recent research suggests that small-cap stocks exhibit negative and significant Monday returns, mid-cap stocks show no Monday effect and large-cap stocks have positive and significant Monday returns. In this short paper we re-examine the Monday effect using a somewhat different approach that the rest of the literature. Specifically, we examine the U.S. mean Monday returns for each market capitalization decile and for each year over the period 1966-2007. We then examine the patterns of these annual Monday returns. Using this method, we find that the Monday effect has dissipated for all sizes of stocks so much that, by the middle 1990s, the Monday returns are generally not significant from zero.