Day-of-the-week effects in the pre-holiday returns of the Standard & Poor's 500 stock index

Abstract

This study investigates the day-of-the-week effects in the pre-holiday returns of the Standard & Poor's 500 stock index. The period investigated is 1930-1999. The analysis is based on within-day contrasts and between-day contrasts. There are three major findings. First, the results are consistent with prior research in that there is a strong pre-holiday effect up to 1987, but the pre-holiday effect is greatly diminished after 1987. Second, contrary to that frequently observed in the literature for typical days, there is no evidence of a weekend effect in pre-holiday returns. Third, a Labor Day effect is observed in the pre-1987 era. The return on the day before Labor Day is significantly greater than the return before other holidays that fall on a Monday. However, this effect is not observed after 1987. A number of other findings are discussed.