Document Type

Journal Article

Department/Unit

Department of Economics

Title

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

Language

English

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. © 2012 Taylor & Francis.

Keywords

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

Publication Date

2012

Source Publication Title

Applied Economics Letters

Volume

19

Issue

3

Start Page

243

End Page

249

Publisher

Taylor & Francis

DOI

10.1080/13504851.2011.572838

ISSN (print)

13504851

ISSN (electronic)

14664291

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