Tests of Monday effect in Warsaw Stock Exchange

Abstract

The aim of this paper is to theoretically test the Monday effect on the Polish stock exchange in the period of 2000 – 2007. Monday effect is the loudest day of the week effect. It says that asset returns are not the same for all days of the week; they are negative on Mondays, and not following rational forecasts. In order to find out if Monday effect exists in the Warsaw Stock Exchange the attributes of daily returns are discussed, and their qualities are compared. The hypotheses checked are as follows: Ho: There is the Monday effect in the Warsaw Stock Exchange. H1: There is no Monday effect in the Warsaw Stock Exchange. This work concentrates on Monday day of the week seasonality. International findings on the basis of statistical analysis report its existence in Germany, Hong-Kong, Italy, Norway, 6 UK, US, and Thailand. The literature does not support it in Australia, Denmark, France, Japan, Lithuania and Sweden. Neither does this paper for Poland. The paper’s hypothesis H1 is accepted on the basis of statistical research. There is no Monday effect in Warsaw Stock Exchange. The reliability of the analysis is examined in the light of three questions: overestimation of the findings, noise in the data, and data snooping. All three, constantly discuss and act as a significance development motor of each calendar seasonality. Keeping the above in mind the author of this study conducted similar to other, theoretical research on data covering Polish stock exchange. The tools used for the analysis of two data samples, Portfolio of 13 stocks and WIG, Warsaw Stock Exchange Index are: descriptive statistics, ANOVA F-Test and Kruskal-Wallis Procedure. The research led to the conclusion that there is no Monday effect in Poland. Study shows that the positive returns on Friday are lengthened to Monday, hence not confirming Monday frequency. The final outcome of the work gives the notice for further development of the models used for the purpose of data testing as well as ongoing observation and revision of related works.