Kamath, Ravindra; Chinpiao Liu
January 2011
Journal of International Business Research;Jan2011 Supplement, Vol. 10, p11
Academic Journal
This empirical investigation examines the daily return data on the market index, IPSA, of the Santiago Stock Exchange of Chile to ascertain the presence of the day-of-the-week effect. The study utilizes the recent 68-month period from January, 2003 through August, 2008. During this period, the Chilean stock market gained almost 190 percent. Studies of equity markets around the world, both, developed and developing markets, have suggested that the market returns tend to depend on the day of the week itself. Most often such an effect has been found because of the significantly negative returns on Mondays and a diametrically opposite evidence for Fridays. Some recent studies however have questioned the continuing presence of such an effect in the U.S as well as in a few other national markets. To determine the presence of this anomalous effect, this study relies on the GARCH methodology. The findings indicate a persistent presence of the day-of-the-week effect in the Chilean market throughout the study period. However, our results are sample period specific. While in the first sub-period, the said effect was caused by the traditional Monday-Friday pattern, in the second sub-period, the anomalous effect was attributable to the significantly positive Wednesday returns. Moreover, this study finds that the daily returns on the Santiago Stock Exchange are far more dependent on the previous day's returns than on the day of the week.


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