The authors investigate the extent to which intra-week seasonality still exists and whether its pattern is uniform across three stock indices and Treasury bonds with seven different maturities. They find that intra-week seasonality continues to be significant and that its pattern is not uniform, either between the stock indices and the Treasury bonds or even among the bonds alone. A pattern shared by stocks and bonds is that Monday returns become increasingly negative with maturity. These findings suggest that neither institutional nor general-equilibrium explanations by themselves can explain the pattern of intra-week seasonality in securities markets.
BEGINNING WITH A PAPER byFrench [6], a number of researchers have documented a puzzling "weekend effect" in U.S. common stock prices. They found that stock positions held over the weekend (or sometimes over other non-trading periods as well) earn a small, negative, but statistically significant return on average. This effect has been documented widely over long and varied time periods for daily stock price relatives, for dividend-adjusted returns, and for individual stocks. (See Cornell [4], Fama [5], Gibbons and Hess [8], French and Roll [7], Harris [9], Keim and Stambaugh [11], McInish and Wood [14], Rogalski [16], and Smirlock and Starks [19].) That these negative returns are economically small does not make them any less puzzling. As the investigations on intra-week seasonality widened, researchers documented seasonal behavior in one-month Treasury bills (Gibbons and Hess [8]), gold (Ball, Torous, and Tschoegl [3]), foreign exchange rates (McFarland, Pettit, and Sung [13]), and federal funds (Saunders and Urich [17]). Internationally, Jaffe and Westerfield [10] have demonstrated that stocks also exhibit intra-week seasonality in Australia, Canada, Japan, and the U.K.' Lakonishok and Levi [12] tried to account for intra-week seasonality by adjusting raw stock returns for market clearing and payment arrangements but found that these institutional factors failed to explain entirely the observed day-* University of North Carolina at Chapel Hill and Claremont Graduate School, respectively. We would like to thank Joel Houston and Phillip Daves for extremely diligent and helpful research assistance and Jeremy Siegel for lengthy discussions and encouragement. Flannery acknowledges financial support from the Business Foundation of North Carolina, Inc. This research was substantially completed while Protopapadakis was a Research Officer at the Federal Reserve Bank of Philadelphia. 'Ariel [1, 2] reports other types of stock return seasonality: a marked intra-monthly pattern to stock returns and exceptionally high returns preceding major holidays. For Treasury bills, Park and Reinganum [15] have shown that there is a "turn-of-the-month" effect tied to various bills' maturity dates (not, as in the other literature cited here, to the trading dates).
432The Journal of Finance to-day variations in returns. Keim and Stambaugh [11] assessed the possibility that the weekend effe...
