The Monday Effect and the Consistent Explanation: The International Perspective

In this paper, we analyse four popular explanations for the Monday effect in fifteen different countries and forty indices. Only one explanations is found to be consistent with our findings. This explanation draws on the behaviour of individual investors in relation to the processing of information regarding sell transactions during the weekend. In most indices we find a significant Monday effect before 1995. In the 1995-2008 period we find no significant difference between the average return on Friday and Monday for the large capitalisation indices, but we do indeed find a significant difference for six small capitalisation indices. If the returns on Monday in this period are conditioned on the sign of the return of the previous Friday, we find a significant difference for eleven of the thirteen small capitalisation indices and only four of the fourteen large capitalisation indices.