Is the era of the day-of-the-week anomaly over?

Ngan Duong Cao, Vu Quang Trinh and Thanh Quoc Nguyen

International Journal of Banking, Accounting and Finance, 2021, vol. 12, issue 2, 118-140

Abstract: While an extensive body of literature has investigated the existence of the day-of-the-week anomaly in different stock markets globally, their findings can only provide implications for potential arbitrage opportunities for domestic investors in the investigated markets. We, therefore, add to these studies by investigating the possibility of international arbitrage activities using such an anomaly, after accounting for currency risk. Initially, we re-confirm the disappearance of the effect in the US market (S%P500), implying that US domestic investors can no longer exploit the day-of-the-week trading strategy in their home market. Further, we test whether investors who use the US dollar as the main trading currency (including US investors) can exploit the anomaly in foreign markets. We employ the daily values of representative indices and the national currencies of the three ASEAN countries (Singapore, Thailand and Malaysia) from 1995 to 2014. We find that the anomaly is evident in all three markets and can be exploited by foreign investors. Furthermore, the Thai exchange is the best investment destination for foreign investors with the highest returns and lowest currency risk. The profitability of this trading strategy is independent of economic activities and significantly dependent on the performance and conditions of the financial markets.

Keywords: stock exchange; anomaly; ASEAN markets; arbitrage; international investment; recession; financial crisis. (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.inderscience.com/link.php?id=114474 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:injbaf:v:12:y:2021:i:2:p:118-140

Access Statistics for this article

More articles in International Journal of Banking, Accounting and Finance from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().