Abstract
This paper examines whether the Weekend effect anomaly documented in the extant literature exists in the Australian Financial Exchange (ASX). Daily data from January 1994 to September 2018 documents a strong Weekend effect in equal-weighted index and small firms before the Global Financial Crises (GFC). That is, as the size of the business increases the Weekend effect starts to dissipate due to significantly negative Monday returns for small-capitalized firms and significantly positive Monday returns for large-capitalized firms. On the other hand, during and after the GFC period, from January 2008 to September 2018, this study finds strong Weekend effect in large capitalized stocks and weakly significant effect in small capitalized stocks. Hence, the evidence suggests that Weekend effect still persist for Australian securities, but have shifted from smaller stocks to larger stocks. Moreover, this study finds absence of Weekend effect in equal- and value-weighted indices in the 10-year recent data. Therefore, investing in stock index futures contracts would not yield better returns due to diminishing of Weekend effect anomaly in indices.
Highlights
Researchers have investigated the stock market calendar anomaly of Weekend Effect for more than four decades
(1989) claim that the Weekend Effect anomaly is unsustainable over the extended period, it exists in certain time periods, fades in some periods and re-emerge again
This research study primarily investigates the presence of calendar anomaly / Weekend Effect anomaly documented in the literature for the Australian financial exchange
Summary
Researchers have investigated the stock market calendar anomaly of Weekend Effect for more than four decades. The results in the paper exhibits a strong Weekend Effect in equal-weighted index, whereas no Weekend Effect is observed for value-weighted index during January 1994 through December 2007 sample period. After establishing the robust Weekend Effect in equal-weighted index only, this study analyses the Weekend Effect by ranking the portfolio of stocks into size quintiles on the basis firms’ market value, by rebalancing the portfolios each year. Consistent with Brusa et al (2000), this study finds the smallest size (first quintile) portfolio exhibits significantly strong Weekend Effect and the largest portfolio of stocks (fifth quintile) exhibit a rather weak reverse or a negative Weekend Effect from 1994 to 2007 (i.e., before the GFC).
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