Day-of-the-week effect on the return and conditional variance of the H-shares index in Hong Kong

Hing Lin CHAN, Kai Yin Woo

    Research output: Contribution to journalJournal articlepeer-review

    1 Citation (Scopus)

    Abstract

    The purpose of this article is to investigate the day-of-the-week effect on both the return and conditional variance (volatility) of the H-shares index in Hong Kong from 3 January 2000 to 1 August 2008. Using an Exponential General Autoregressive Conditional Heteroskedasticity (EGARCH) specification to model the conditional variance, we find that the day-ofthe-week effect is present in both return and variance equations. In particular, higher risk-adjusted returns are found on Monday and Friday. However, after adjusting for market risks that vary across the days of the week, only the Monday effect remains. The conditional variance model also finds that the highest volatility of return also occurs on Monday. Thus, the Monday effects on risk-adjusted returns may be a reward for higher volatility on that day. However, after adjusting for transaction costs, the abnormal returns for Monday become negligible.

    Original languageEnglish
    Pages (from-to)243-249
    Number of pages7
    JournalApplied Economics Letters
    Volume19
    Issue number3
    DOIs
    Publication statusPublished - Feb 2012

    Scopus Subject Areas

    • Economics and Econometrics

    User-Defined Keywords

    • Day-of-theweek effect
    • EGARCH model
    • H-shares index
    • Volatility

    Fingerprint

    Dive into the research topics of 'Day-of-the-week effect on the return and conditional variance of the H-shares index in Hong Kong'. Together they form a unique fingerprint.

    Cite this