Day-of-week and size effects in emerging markets: evidence from Chile

• Autores: Pablo Marshall, Eduardo Walker
• Localización: Revista de análisis económico, ISSN-e 0718-8870, ISSN 0716-5927, Vol. 15, Nº 2, 2000, págs. 89-108
• Idioma: inglés
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• Dialnet Métricas: 1 Cita
• Resumen

  • This paper studies empirical regularities of daily log returns for the years 1989 through 1996, using aggregate indexes and quintiles rated by size, for a specific emerging market: the case of Chile.

    Within the context of the existing literature on emerging markets, this study's contributions are the following: First, earlier studies use aggregate indexes. This one extends the samples and also considers more detailed information, which gives a better representation of individual stock behavior. Second, non-parametric statistical tests are used as a complements of classical ones.

    The study's main result shows important day-of-the-week effects on average returns and traded volumes, but not on variances. These results, obtained with both classical and non-parametric methods, are valid for aggregate indexes, quintiles and sub-periods. We also find a seasonal pattern in the size-effect, which it is significantly positive on Fridays and significantly negative on Mondays. In the case of this emerging market, the evidence is inconsistent with the hypothesis that the weekend effect is due to small-investor-portfolio-adjustment-on-Mondays. Unless there is a reason to believe that bad news is put off to the weekend (and good news to Fridays) especially in the case of smaller firms, the seasonal size-effect and the absence of effects in variances also contradict this hypothesis. There is stronger evidence that favors the hypothesis that investors comply with weekly investment plans, as proposed herein.

    Other results confirm that daily returns in the Chilean stock market behave very much like the more developed countries', although the different effects (size-, kurtosis and autocorrelation) are more pronounced. This is also true for the size-based quintiles. Results are also consistent with those obtained by other authors that analyze emerging market monthly index returns.