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Estimation of the Day of the Week Effect on Stock Market Volatility in the U.S. Manufacturing Sector using GARCH and EGARCH models

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  • Kasai, Katsuya

Abstract

This paper carried out two main studies: Part 1 attempted to conduct a set of tests for weak form efficiency (WFE); Part 2 tried to estimate day of the week effect using GARCH and EGARCH models. The principal objective of this paper, hence, is to test the weak-form efficiency for selected three stocks (Molex Incorporated, Monro Muffler Brake, Inc., and Monterey Gourmet Foods, Inc.) and two stock indices (NYSE/AMEX/NASDAQ index capitalisation-based Deciles 1 and 10). As for Part I, this paper identified that there are negative trends on Monday and Wednesday and positive trends are found on Friday. This result also follows the general finding of existing literature. Likewise, the results for Part II showed that Monday, Wednesday, and Friday had negative trends although the sizes of coefficients are small. In addition, different from aforementioned three, returns on Tuesday is significant and positive. Overall, the results seem to provide ample evidence of day of the week effect on stock market volatility.

Suggested Citation

  • Kasai, Katsuya, 2012. "Estimation of the Day of the Week Effect on Stock Market Volatility in the U.S. Manufacturing Sector using GARCH and EGARCH models," MPRA Paper 52240, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:52240
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    References listed on IDEAS

    as
    1. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    2. Alexandros Milionis & Demetrios Moschos, 2000. "On the validity of the weak-form efficient markets hypothesis applied to the London stock exchange: comment," Applied Economics Letters, Taylor & Francis Journals, vol. 7(7), pages 419-421.
    3. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    4. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Day of Weak Effect; Weak Form Efficiency; GARCH model; Stock Market;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G1 - Financial Economics - - General Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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