Department of Economics
Day-of-the-week effect on the return and conditional variance of the H-shares index in Hong Kong
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.
Day-of-theweek effect, EGARCH model, H-shares index, Volatility
Source Publication Title
Applied Economics Letters
Taylor & Francis
Link to Publisher's Edition
Chan, Hing Lin, and Kai-Yin Woo. "Day-of-the-week effect on the return and conditional variance of the H-shares index in Hong Kong." Applied Economics Letters 19.3 (2012): 243-249.