Monday Effect in the RMW and the Short‐Term Reversal Factors

Fahad Ali and Numan Ülkü

International Review of Finance, 2019, vol. 19, issue 3, 681-691

Abstract: We document that the positive (opposite) Monday or early‐in‐the‐week effect in Fama–French's robust‐minus‐weak (RMW) factor, first reported by Ülkü (2017), is pervasive across international markets, ruling out data‐snooping. As in the United States, the pattern has strengthened over time. Monday effect in RMW is linked to a combination of institutional investor trading pattern and the weekend sound‐mind effect. We devise a test of the external validity of the weekend sound‐mind effect hypothesis: the short‐term reversal factor, which is profitable within its holding period but leads to larger losses subsequently, exhibits a significant negative Monday effect, as predicted by this hypothesis. Mondays buck fads.

Date: 2019
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