Day-of-the-Week Eﬀect and Spread Determinants: Some International Evidence From Equity Markets
30 Pages Posted: 13 Aug 2019
Date Written: May 18, 2019
We investigate the day-of-the-week eﬀect in relation to bid ask spreads determinants by employing a comprehensive dataset of international equity markets from 2000 until 2015 incorporating diﬀerent market phases, such as various booms and crashes. To this end, we apply a battery of tests regarding returns patterns and a panel cointegration technique. Given that there is growing evidence that stock markets behave diﬀerently on diﬀerent days of the week, we ﬁnd that there is signiﬁcant evidence in favor of an international day-of-the-week eﬀect concerning the impact of prices, volatility and volume on bid ask spreads. A panel error correction model allows us to infer a day-of-the-week eﬀect in the speed of adjustment of spreads. Our results entail signiﬁcant implications for investors, market regulators and policy-makers.
Keywords: Day-of-the-week, Bid ask spread, Panel error correction, Equity markets
Suggested Citation: Suggested Citation