Chinese institutional investors and Kamara’s Monday effect
Chinese institutional investors and Kamara’s Monday effect
Mondays exhibit lower stock returns than Fridays, which is known as the Monday effect. Kamara (1997) argued that the Monday effect disappeared due to institutional trading and the introduction of derivative instruments. My paper tests this hypothesis using Chinese data. As institutional investors are unimportant and arbitrage possibilities limited, the Monday effect should not disappear – but I find the opposite. Modeling the conditional expected utility of an individual investor, I show that the trading strategy, “sell on Monday and buy next Friday”, yielded positive outcomes. Hence, trading incentives existed and led to the disappearance of the Monday effect in China
40-47
Kling, Gerhard
feea1f9e-c49a-4d9c-b688-ec839cef9624
2005
Kling, Gerhard
feea1f9e-c49a-4d9c-b688-ec839cef9624
Kling, Gerhard
(2005)
Chinese institutional investors and Kamara’s Monday effect.
Journal of Emerging Markets, 10 (3), .
Abstract
Mondays exhibit lower stock returns than Fridays, which is known as the Monday effect. Kamara (1997) argued that the Monday effect disappeared due to institutional trading and the introduction of derivative instruments. My paper tests this hypothesis using Chinese data. As institutional investors are unimportant and arbitrage possibilities limited, the Monday effect should not disappear – but I find the opposite. Modeling the conditional expected utility of an individual investor, I show that the trading strategy, “sell on Monday and buy next Friday”, yielded positive outcomes. Hence, trading incentives existed and led to the disappearance of the Monday effect in China
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Monday_effect.doc
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Published date: 2005
Identifiers
Local EPrints ID: 165731
URI: http://eprints.soton.ac.uk/id/eprint/165731
ISSN: 1083-9798
PURE UUID: 7d13e9ee-5b3f-4017-ba37-811d0fe93e10
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Date deposited: 20 Oct 2010 08:44
Last modified: 14 Mar 2024 02:11
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Author:
Gerhard Kling
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