Has the Day of the Week Effect on Volatility Structure of the SandP 500 and Its Sectors Changed Over the 2007-2009 Recession?

• Activity Number: 426 - Contributed Poster Presentations:Business and Economic Statistics Section
• Type: Contributed
• Date/Time: Tuesday, July 31, 2018 : 2:00 PM to 3:50 PM
• Sponsor: Business and Economic Statistics Section
• Author(s): Marcel Trick* and V A Samaranayake
• Companies: and Missouri S&T
• Keywords: EGARCH; Standard and Poor's; Volatility structure change; Trading day effect

Abstract

Several studies have shown that the mean returns and the volatility structure of stock markets change seasonally or by day of the week. For instance, some authors found out that Monday returns are lower compared to Friday returns or that volatility on Wednesdays are lower compared to the rest of the week. Other researchers showed that these effects changed after certain periods of economic stress. This led to the question: Is the day of the week effect on volatility present in the US stock market and if so, have patterns changed from pre-recession through the 2007-2009 recession into the post-recession period? Results show that there is a day of the week effect on volatility for almost every sector, where volatility was highest on Tuesdays in pre-recession period for most of the sectors. However, results differ from sector to sector for recession and post-recession periods showing changes after certain periods. They also indicate a sharp increase of volatility during the recession period as well as a higher overall volatility after the recession compared to the pre- recession period.