The day-of-the-week effect: South African stock market indices

Elda du Toit, John Henry Hall and Rudra Prakash Pradhan

African Journal of Economic and Management Studies, 2018, vol. 9, issue 2, 197-212

Abstract: Purpose - The presence of a day-of-the-week effect has been investigated by many researchers over many years, using a variety of financial data and methods. However, differences in methodology between studies could have led to conflicting results. The purpose of this paper is to expand on an existing study to observe whether an analysis of the same data set with some added years and using a different statistical technique provide the same results. Design/methodology/approach - The study examines the presence of a day-of-the-week effect on the Johannesburg Stock Exchange (JSE) indices for the period March 1995-2016, using a GARCH model. Findings - The findings show that, contrary to the original study, the day-of-the week effect is present in both volatility and return equations. The highest and lowest returns are observed on Monday and Friday, respectively, while volatility is observed on all five days from Monday to Friday. Originality/value - This study adds to the existing literature on day-of-the-week effect of JSE indices, where different patterns or, in some cases, no pattern have been noted. Few previous studies on the day-of-the-week effect observed the effect at micro-level for separate industries or made use of a GARCH model. The present study thus expands on the study of Mbululu and Chipeta (2012), by adding four additional observation years and using a different statistical technique, to observe differences that arise from a different time period and statistical technique. The results indicate that a day-of-the-week effect is mostly a function of the statistical technique applied.

Keywords: Volatility; GARCH; Day-of-the-week effect; JSE indices; C22; G10; G12 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajemsp:ajems-07-2017-0163

DOI: 10.1108/AJEMS-07-2017-0163

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