What is weekend effect in finance?
Q. What is the weekend effect?- Published on 04 Oct 17a. Returns by investors on stocks are lower on Monday than the previous Friday
b. Returns by investors on stocks are lower on Saturday and Sunday
c. Returns by investors on stocks are lower on Friday as against Monday
d. All of the above
ANSWER: Returns by investors on stocks are lower on Monday than the previous Friday
The “weekend effect” refers to a phenomenon observed in financial markets wherein the returns that investors earn on stocks on Mondays is lower than what they earned on them on the previous Friday.
There are many theories that have been proposed by market experts to explain the prevalence of the weekend effect.
Some attribute lower returns on Mondays to the fact that companies usually release bad news on Fridays after the market closes, so the news has its negative impact on the stock price on Monday rather than on Friday.
Others have disputed the validity of the weekend effect arguing either that it never existed or that its impact has tended to fade over the years.
