Day-of-The-Week and Session Effects: Evidence from an Emerging Market

Abstract

Empirical studies on market returns are carried out to try to better understand the various markets. An interesting and not fully explained finding is that mean returns differ across the day of-the-week. The most commonly found patterns in developed markets and some developing markets are the “low Monday” and “high Friday” effects. Some studies have also uncovered a less common structure in some markets where there seems to be a low Tuesday effect. A previous study examining 1995-2001 period found that the Istanbul Stock Exchange (ISE) also displays the low Monday and high Friday effects, and more interestingly unlike the U.S. the bulk of ISE low Monday returns came from Monday afternoon. This study contributes to the literature by examining the returns of actual stocks from the ISE between 1991-2002. The data is analyzed for the whole period and subgroups. We separate daily returns into returns in the Morning and Afternoon trading sessions. Furthermore, we separate the entire sample into 3 subsamples. We also examine the day-of-the-week effects by making them conditional on the previous days return ( or -). As a result we provide a comprehensive picture of the behaviour of one of the major emerging stock markets of the world.

Keywords: Day-of-the-week effect, Session effect, Anomalies, Emerging Market, Istanbul Stock Exchange

JEL Classification: G14, G15