Title: Is the era of the day-of-the-week anomaly over?

Authors: Ngan Duong Cao; Vu Quang Trinh; Thanh Quoc Nguyen

Addresses: University of Bath School of Management, Claverton Road, Bath, BA2 7AY, UK ' Huddersfield Business School, University of Huddersfield, Queensgate, Huddersfield, HD1 3DH, UK ' Division of Trade Management, Department of Industry and Trade of Ben Tre Province, 71-77 Nguyen Hue, Ward 1, Ben Tre City, Ben Tre Province, Vietnam

Abstract: While an extensive body of literature has investigated the existence of the day-of-the-week anomaly in different stock markets globally, their findings can only provide implications for potential arbitrage opportunities for domestic investors in the investigated markets. We, therefore, add to these studies by investigating the possibility of international arbitrage activities using such an anomaly, after accounting for currency risk. Initially, we re-confirm the disappearance of the effect in the US market (S&P500), implying that US domestic investors can no longer exploit the day-of-the-week trading strategy in their home market. Further, we test whether investors who use the US dollar as the main trading currency (including US investors) can exploit the anomaly in foreign markets. We employ the daily values of representative indices and the national currencies of the three ASEAN countries (Singapore, Thailand and Malaysia) from 1995 to 2014. We find that the anomaly is evident in all three markets and can be exploited by foreign investors. Furthermore, the Thai exchange is the best investment destination for foreign investors with the highest returns and lowest currency risk. The profitability of this trading strategy is independent of economic activities and significantly dependent on the performance and conditions of the financial markets.

Keywords: stock exchange; anomaly; ASEAN markets; arbitrage; international investment; recession; financial crisis.

DOI: 10.1504/IJBAAF.2021.114474

International Journal of Banking, Accounting and Finance, 2021 Vol.12 No.2, pp.118 - 140

Accepted: 23 Sep 2019
Published online: 01 Mar 2021 *

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