Testing the Monday Effect using High-frequency Intraday Returns: A Spatial Dominance Approach
Sungro Lee (Sungkyunkwan University), Chang Sik Kim (Sungkyunkwan University) and In-Moo Kim (Sungkyunkwan University)발행년도 2012Vol. 28No. 1
초록This paper employs a new testing procedure for detecting the presence of Monday effectsusing high-frequency intraday data. Our approach to test the Monday effect is based onspatial dominance, which enables us to analyze the expected sum of instantaneous utilitiesduring trading hours by considering the intraday patterns of returns. The testing of themethods used in previous studies compares the expected utilities only at a specific time,usually market closing time. Empirical results from our tests provide strong evidence of theMonday effect for the 1983 to 1987 period. We also find that the Monday effect is driven bylarge negative returns accrued during early Monday mornings, The conventional analysesfor the Monday effect, such as regression analysis and stochastic dominance, cannot providestrong evidence of the Monday effect for the same period because these testing methods donot consider the return behavior during Monday mornings.