Abstract:
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Previous studies have shown that returns associated with the stock market or foreign exchange's futures show variations across the day of the week. On such study, that employs a modified GARCH model for estimation, shows that returns associated with the S&P 500 stock index exhibit highest volatility on Fridays and lowest on Wednesdays. In this study we investigate whether this day-of-the-week effect on returns and volatility is present in the different sectors that constitute the S&P 500 Index. The data set used provide daily returns from February 2005 to February 2015 and is more recent than the data employed in the original study on the S&P Index. Results show that in general, Tuesdays show high volatility for a majority of the sectors, Wednesdays show high returns for most sectors, and that this effect tapers down over the week with Mondays not exhibiting any increase in volatility or returns. Results also show that that the nature of the day-of-the-week effect is not consistent across sectors.
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