The day-of-the-week anomaly: the role of institutional investors in Japan

Abstract

A large ‘day-of-the-week’ literature shows abnormal losses on Mondays. Recent articles for US stocks focus on the role of the type of investor. The central idea in these articles is that the marginal-price setting changes on Monday. To identify the type of investor, these articles look at the proportion of stock ownership held by individuals and institutions. For an out-of-sample test to the US market studies, we study the Japanese stock market. Consistent with the US results, Japanese day-of-the-week patterns show Monday losses and strong Monday losses predicted by Friday losses. However, we find no evidence that the type of investor influences the Monday loss or Friday-to-Monday autocorrelation.

Notes

¹The issues examined include, but are not limited to, pricing at the close (Keim and Stambaugh, 1984), market settlement requirements (Gibbons and Hess, 1981; Lakonishok and Levi, 1982; Damodaran, 1989), delays in announcements of unfavourable earnings (Penman, 1987; Damodaran, 1989), changes in demands of individual investors and exchange rate changes (Jaffe and Westerfield, 1985a,b). Other articles that suggest frictions include Admati and Pfleiderer (1989) and Chen and Singal (2003).

²Lehmann and Modest (1994), Kim and Oppenheimer (2002) and Hamao and Hasbrouck (1995) provide a detailed description of the trading mechanisms in the Japanese markets as well as a thorough discussion of the role of the satori.