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Changes in settlement regime and the modulation of day-of-the-week effects in stock returns

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  • Stephen Keef
  • Paul McGuinness

Abstract

During the period 1989 to 1996, the New Zealand Stock Exchange modified the settlement regime of its listed stocks on six separate occasions. These changes provide an opportunity to assess the impact of settlement practice upon day-of-the-week returns in a more meaningful fashion than has, hitherto, been the case. The time-series approach suggested avoids many of the confounding effects, pertaining to differences in market micro-structure and trading characteristics, that plague inferences drawn from cross-market analyses. The precise impact of settlement on day-of-the-week returns is assessed using a methodology incorporating orthogonal contrasts. This approach avoids issues of multiple-testing and, as a result, offers new insights into the influence of settlement regimes on day-of-the-week returns. The results indicated little support for priors determined from standard settlement arguments. However, as in other markets, a depressed Monday return was evident.

Suggested Citation

  • Stephen Keef & Paul McGuinness, 2001. "Changes in settlement regime and the modulation of day-of-the-week effects in stock returns," Applied Financial Economics, Taylor & Francis Journals, vol. 11(4), pages 361-372.
    • Handle: RePEc:taf:apfiec:v:11:y:2001:i:4:p:361-372
    DOI: 10.1080/096031001300313929
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    Cited by:

    1. Stephen Keef & Melvin Roush, 2005. "Day-of-the-week effects in the pre-holiday returns of the Standard & Poor's 500 stock index," Applied Financial Economics, Taylor & Francis Journals, vol. 15(2), pages 107-119.
    2. Leonard Grebe & Dirk Schiereck, 2024. "Day-of-the-week effect: a meta-analysis," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 14(4), pages 1057-1094, December.
    3. Shlomo Zilca, 2017. "Day-of-the-week returns and mood: an exterior template approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 3(1), pages 1-21, December.
    4. Andrew Worthington, 2010. "The decline of calendar seasonality in the Australian stock exchange, 1958–2005," Annals of Finance, Springer, vol. 6(3), pages 421-433, July.
    5. Maria Caporale, Guglielmo & Zakirova, Valentina, 2017. "Calendar anomalies in the Russian stock market," Russian Journal of Economics, Elsevier, vol. 3(1), pages 101-108.

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