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Does the day of the week effect exist once transaction costs have been accounted for? Evidence from the UK

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  • A. Gregoriou
  • A. Kontonikas
  • N. Tsitsianis

Abstract

This article investigates the day of the week anomaly in the FTSE 100 Share Index over an 11-year time period from 1 January 1986 to 31 December 1997. Its focus is to assess whether the day of the week effect continues to persist once transactions costs are considered. Unlike previous literature it uses the bid-ask spread as a proxy for transactions costs. It finds that once returns become robust to transactions costs the anomaly appears to fade away. It then extends the research by looking at the time-varying volatility of stock returns with use of a GARCH model. The GARCH results further support the fact that transaction costs appear to die away the day of the week anomaly in the UK Stock market.

Suggested Citation

  • A. Gregoriou & A. Kontonikas & N. Tsitsianis, 2004. "Does the day of the week effect exist once transaction costs have been accounted for? Evidence from the UK," Applied Financial Economics, Taylor & Francis Journals, vol. 14(3), pages 215-220.
    • Handle: RePEc:taf:apfiec:v:14:y:2004:i:3:p:215-220
    DOI: 10.1080/0960310042000187388
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    References listed on IDEAS

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    Cited by:

    1. P., Srinivasan & M., Kalaivani, 2013. "Day-of-the-Week Effects in the Indian stock market," MPRA Paper 46805, University Library of Munich, Germany.
    2. Olfa Chaouachi & Imen Dhaou, 2020. "The Day of the Week Effect: Unconditional and Conditional Market Risk Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 10(6), pages 94-98.
    3. Hernández, Juan R., 2020. "Covered Interest Parity: A Stochastic Volatility Approach to Estimate the Neutral Band," MPRA Paper 100744, University Library of Munich, Germany.
    4. Lucey, Brian M., 2006. "Investigating the determinants of the Wednesday seasonal in Irish Equities," Research in International Business and Finance, Elsevier, vol. 20(1), pages 62-76, March.
    5. Nickolaos Tsangarakis, 2007. "The day-of-the-week effect in the Athens Stock Exchange (ASE)," Applied Financial Economics, Taylor & Francis Journals, vol. 17(17), pages 1447-1454.
    6. Mahendra Chandra, 2006. "The day-of-the-week effect in conditional correlation," Review of Quantitative Finance and Accounting, Springer, vol. 27(3), pages 297-310, November.
    7. Mostafa Saidur Rahim Khan & Naheed Rabbani, 2019. "Market Conditions and Calendar Anomalies in Japanese Stock Returns," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 26(2), pages 187-209, June.
    8. Roberto Joaquín Santillán Salgado & Alejandro Fonseca Ramírez & Luis Nelson Romero, 2019. "The "day-of-the-week" effects in the exchange rate of Latin American currencies," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 14(PNEA), pages 485-507, Agosto 20.
    9. Khelifa Mazouz & Brahim Saadouni, 2007. "The price effects of FTSE 100 index revision: what drives the long-term abnormal return reversal?," Applied Financial Economics, Taylor & Francis Journals, vol. 17(6), pages 501-510.
    10. Georgios Bampinas & Stilianos Fountas & Theodore Panagiotidis, 2015. "The Day-of-the-Week Effect is Weak: Evidence from the European Real Estate Sector," Working Paper series 15-19, Rimini Centre for Economic Analysis.
    11. Richards, Daniel W. & Willows, Gizelle D., 2019. "Monday mornings: Individual investor trading on days of the week and times within a day," Journal of Behavioral and Experimental Finance, Elsevier, vol. 22(C), pages 105-115.
    12. James Mark Gbeda & James Atta Peprah, 2018. "Day of the week effect and stock market volatility in Ghana and Nairobi stock exchanges," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 42(4), pages 727-745, October.
    13. Maria Caporale, Guglielmo & Zakirova, Valentina, 2017. "Calendar anomalies in the Russian stock market," Russian Journal of Economics, Elsevier, vol. 3(1), pages 101-108.
    14. Kenneth Hogholm & Johan Knif & Seppo Pynnonen, 2011. "Common and local asymmetry and day-of-the-week effects among EU equity markets," Quantitative Finance, Taylor & Francis Journals, vol. 11(2), pages 219-227.

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