The week-of-the-month effect in stock returns: The evidence from the S&P Composite Index

Abstract

Theweekend effect and theyearend effect are some of the seasonal anomalies in financial markets that have been widely discussed in the finance literature. In this paper, using weekly observations of the S&P Composite Index over the period from July 1962 through June 1990, plus several subperiods, the authors identify the presence of a thus far unknown seasonal anomaly in the form of aweek-of-the-month return pattern in the stock market. The results suggest the existence of a statistically different weekly return pattern for different weeks of a month. Specifically, the returns during the first week of a month tend to be significantly positive while the returns during the other weeks of a month are statistically indistinguishable from zero.

This is a preview of subscription content, log in to check access.

References

  1. Aggarwal, Reena, andPietra Rivoli. “Seasonal and Day-of-the-Week Effects in Four Emerging Stock Markets.”Financial Review 24, no. 4 (November 1989): 541–550.

    Article  Google Scholar 

  2. Ariel, Robert A. “A Monthly Effect in Stock Returns.”Journal of Financial Economics 18, no. 1 (March 1987): 161–174.

    Article  Google Scholar 

  3. Blume, Marshall E., andRobert F. Stambaugh. “Biases in Computed Returns: An Application to the Size Effect.”Journal of Financial Economics 12, no. 3 (1983): 387–404.

    Article  Google Scholar 

  4. Brown, Philip, Donald B. Keim Allan W. Kleidon, andTerry A. Marsh. “Stock Return Seasonalities and the Tax-Loss Selling Hypothesis.”Journal of Financial Economics 12, no. 1 (June 1983): 105–127.

    Article  Google Scholar 

  5. Chang, Eric C., andChan-Wung Kim. “Day of the Week Effect and Commodity Price Changes.”Journal of Futures Markets 8, no. 2 (1988): 229–242.

    Article  Google Scholar 

  6. Connolly, Robert A. “An Examination of the Robustness of the Weekend Effect.”Journal of Financial and Quantitative Analysis 24, no. 2 (June 1989): 133–168.

    Article  Google Scholar 

  7. Flannery, Mark J., andAris A. Protopapadakis. “From T-Bills to Common Stocks: Investigating the Generality of Intra-Week Return Seasonality.”Journal of Finance 53, no. 2 (June 1988): 431–450.

    Article  Google Scholar 

  8. French, Kenneth K. “Stock Returns and the Weekend Effect.”Journal of Financial Economics 8, no. 1 (November 1980): 55–70.

    Article  Google Scholar 

  9. Gibbons, Michael R., andPatrick Hess. “Day-of-the-Week Effects and Asset Returns.”Journal of Business 54, no. 4 (October 1981): 579–596.

    Article  Google Scholar 

  10. Gultekin, Mustafa N., andN. Bulent Gultekin. “Stock Market Seasonality: International Evidence.”Journal of Financial Economics 12, no. 4 (1983): 469–482.

    Article  Google Scholar 

  11. Jaffe, Jeffery, andRandolph Westerfield. “Is There a Monthly Effect in Stock Market Returns?.”Journal of Banking and Finance 13 (June 1989): 237–244.

    Article  Google Scholar 

  12. Jaffe, Jeffery, andRandolph Westerfield. “The Week-End Effect in Common Stock Returns: The International Evidence.”Journal of Finance 40, no. 2 (June 1985): 433–454.

    Article  Google Scholar 

  13. Keim, Donald. “Size-Related Anomalies and Stock Return Seasonality: Further Empirical Evidence.”Journal of Financial Economics 12, no. 1 (June 1983): 13–32.

    Article  Google Scholar 

  14. Kohers, Theodor, andRaj K. Kohli. “The Anomalous Stock Market Behavior of Large Firms in January: The Evidence from the S&P Composite and Component Indexes.”Quarterly Journal of Business and Economics 30, no. 3 (Summer 1991): 14–32.

    Google Scholar 

  15. Lakonishok, Josef, andEdwin Maberly. “The Weekend Effect: Trading Patterns of Individuals and Institutional Investors.”Journal of Finance 45, no. 1 (March 1990): 231–243.

    Article  Google Scholar 

  16. Lakonishok, Josef, andMaurice D. Levi. “Weekend Effects on Stock Returns: A Note.”Journal of Finance 37, no. 3 (June 1982): 883–889.

    Article  Google Scholar 

  17. Officer, R.R. “Seasonality in Australian Capital Markets: Market Efficiency and Empirical Issues.”Journal of Financial Economics 2, no. 1 (March 1975): 29–52.

    Article  Google Scholar 

  18. Pettengil, Glen N. “Persistent Seasonal Return Patterns.”Financial Review 1 (November 1985): 271–286.

    Article  Google Scholar 

  19. Phillips, Patrick, J. Frederick, andThomas Schneeweis. “The Weekend Effect for Stock Index and Stock Index Futures: Dividend and Interest Rate Effects.”Journal of Futures Markets 8, no. 1 (February 1988): 115–122.

    Article  Google Scholar 

  20. Reinganum, Marc. “The Anomalous Stock Market Behavior of Small Firms in January: Empirical Tests for Tax-Loss Selling Effects.”Journal of Financial Economics 12, no. 1 (June 1983): 89–104.

    Article  Google Scholar 

  21. Ritter, Jay R., andNavin Chopra. “Portfolio Rebalancing and the Turn-of-the-Year Effect.”Journal of Finance 44, no. 1 (March 1989): 149–166.

    Article  Google Scholar 

  22. Rogalski, Richard J. “New Findings Regarding Day-of-the-Week Returns Over Trading and Non-Trading Periods: A Note.”Journal of Finance 39, no. 5 (December 1984): 1603–1614.

    Article  Google Scholar 

  23. Roll, Richard. “On Computing Mean Returns and the Small Firm Premium.”Journal of Financial Economics 12, no. 3 (1983): 371–386.

    Article  Google Scholar 

  24. —. “Vas ist das? The Turn of the Year Effect and Return Premia of Small Firms.”Journal of Portfolio Management 9 (Winter 1983): 18–28.

    Google Scholar 

  25. Rozeff, Michael S., andWilliam R. Kinney. “Capital Market Seasonality: The Case of Stock Market Returns.”Journal of Financial Economics 3, no. 4 (October 1976): 379–402.

    Article  Google Scholar 

  26. Smirlock, Michael, andLaura Starks. “Day of the Week and Intraday Effects in Stock Returns.”Journal of Financial Economics 17, no. 1 (1986): 197–210.

    Article  Google Scholar 

  27. Standard & Poor’s Security Price Index Record. New York: Standard & Poor’s Corporation, various issues.

  28. Tinic, Seha M., andRichard R. West. “Risk and Return: January vs. the Rest of the Year.”Journal of Financial Economics 13, no. 4 (December 1984): 561–574.

    Article  Google Scholar 

Download references

Author information

Affiliations

Authors

Corresponding author

Correspondence to Raj K. Kohli.

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Kohli, R.K., Kohers, T. The week-of-the-month effect in stock returns: The evidence from the S&P Composite Index. J Econ Finan 16, 129 (1992). https://doi.org/10.1007/BF02920113

Download citation

Keywords

  • Stock Market
  • Stock Return
  • Abnormal Return
  • Composite Index
  • Financial Economic