Day of the Week and the Cross-Section of Returns

Anomalies and News

“…We do not classify our anomalies into speculative and nonspeculative legs like Birru () does, and thus our results may not be directly comparable to his, but we do find evidence of day‐of‐the‐week effects with our anomaly variables. Both High Net and Low Net perform better on Mondays, and worse on Friday, although the Friday effects are not significant.…”

“…Birru () finds that anomalies for which the long leg is the speculative leg perform better on Fridays, and anomalies for which the short leg is the speculative leg perform better on Mondays. Birru () argues that these patterns are consistent with studies in the psychology literature that show that mood increases from Thursday to Friday and decreases on Monday.…”

Psychology-Based Models of Asset Prices and Trading Volume

“…Most models of asset prices assume that investors evaluate risk according to the Expected Utility framework, with a utility function that is increasing, concave, and defined over consumption outcomes. 30 Building on evidence that, on average, a person's mood improves as the week progresses from Monday to Friday, Birru (2018) predicts that speculative stocks -stocks that are hard to value or to arbitrage -will perform well (poorly) relative to non-speculative stocks on Fridays (Mondays). The data line up with this prediction.…”

The evolution and cross-section of the day-of-the-week effect

“…More recently, Hirshleifer et al (2017) study the effect of mood on the cross section of returns by using mood-mimicking returns and find that mood is a valid explanation of the day-of-the-week effect. Further support for the behavioral explanation of the day-of-the-week effect is recently provided by Birru (2017).…”