Day-of-the-Week Effects in Liquidity on the Warsaw Stock Exchange

Sabina Nowak, Joanna Olbryś

DOI: http://dx.doi.org/10.12775/DEM.2015.003

Abstract


The purpose of this study is to explore the day-of-the-week patterns in liquidity on the Warsaw Stock Exchange (WSE) using daily turnover as a liquidity measure. The existence of an inverted U-shape in the stock turnover across the trading days is examined. The research sample covers 2502 daily observations in the period January 2005 – December 2014. 53 WSE-listed companies divided into three size groups are investigated. In the study the OLS method with the HAC covariance matrix estimation and the GARCH-type models are employed. The results indicate that liquidity on the WSE tends to be significantly lower on Mondays and higher on Wednesdays in comparison with the other days of the week. However, the inverted U-shape in daily turnover occurs only among the companies with the largest market capitalization.

Keywords


market microstructure; day-of-the-week effect; liquidity; turnover; HAC; GARCH; Warsaw Stock Exchange

Full Text:

PDF

References


Adkins, L.C. (2014), Using Gretl for Principles of Econometrics, 4th Edition, Version 1.041.

Alrabadi, D.W.H. (2012), An Analysis of Aggregate Market Liquidity: The Case of Amman Stock Exchange, International Business Research, 5(5), 184–194, DOI: http://dx.doi.org/10.5539/ibr.v5n5p184.

Apolinario, R.M.C, Santana, O.M., Sales, L.J. (2006), Day of the Week Effect on European Stock Markets, International Research Journal of Finance and Economics, 2, 53–70.

Berument, H., Kiymaz, H. (2001), The Day of the Week Effect on Stock Market Volatility, Journal of Economics and Finance, 25(2), 181–193, DOI: http://10.1016/S1058-3300(03)00038-7.

Bollerslev, T. (1986), Generalized Autoregressive Conditional Heteroskedasticity, Journal of Econometrics, 31, 307–327, DOI: http://10.1016/0304-4076(86)90063-1.

Bollerslev, T., Wooldridge, J.M. (1992), Quasi-Maximum Likelihood Estimation and Inference in Dynamic Models with Time-Varying Covariances, Econometric Reviews, 11, 143–179, DOI: http://10.1080/07474939208800229.

Chordia, T., Roll, R., Subrahmanyam, A. (2001), Market Liquidity and Trading Activity, Journal of Finance, 56(2), 501–530, DOI: http://10.1111/0022-1082.00335.

Chordia, T., Sarkar, A., Subrahmanyam, A. (2005), An Empirical Analysis of Stock and Bond Market Liquidity, Review of Financial Studies, 18(1), 85–129, DOI: http://10.1093/rfs/hhi010.

Choudhry, T. (2000), Day of the week Effect in Emerging Asian Stock Markets: Evidence from the GARCH Model, Applied Financial Economics, 10, 235–242, DOI: http://10.1080/096031000331653.

Elliott, G., Rothenberg, T.J., Stock, J.H. (1996), Efficient Tests for an Autoregressive Unit Root, Econometrica, 64(4), 813–836, DOI: http://dx.doi.org/10.2307/2171846.

Engle, R.F. (1982), Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflations, Econometrica, 50, 987–1007, DOI: http://dx.doi.org/10.2307/1912773.

Fama, E.F. (1965), The Behaviour of Stock Market Prices, Journal of Business, 38, 34–105.

Fama, E.F., French, K.R. (1993), Common Risk Factors in the Returns on Stocks and Bonds, Journal of Financial Economics, 33(1), 3–56.

Fiszeder, P. (2009), Modele klasy GARCH w empirycznych badaniach finansowych (The Class of GARCH Models in Empirical Finance Research), Nicolaus Copernicus University Press, Torun.

Foerster, S., Keim, D. (1993), Direct Evidence of Non–Trading of NYSE and AMEX Stocks, Working Paper, University of Pennsylvania.

Foster, F.D., Viswanathan, S. (1990), A Theory of the Interday Variations in Volume, Vari-ances, and Trading Cost in Securities Market, Review of Financial Studies, 3(4), 593–624, DOI: http://dx.doi.org/10.1093/rfs/3.4.593.

Foster, F.D., Viswanathan, S. (1993), Variations in Trading Volume, Return Volatility, and Trading Costs: Evidence on Recent Price Formation Models, Journal of Finance, 48(1), 187–211, DOI: http://dx.doi.org/10.2307/2328886.

Franses, P.H., Paap, R. (2000), Modelling Day-of-the-Week Seasonality in the S&P 500 Index, Applied Financial Economics, 10, 483–488, DOI: http://dx.doi.org/10.1080/096031000416352.

French, K.R. (1980), Stock Returns and the Weekend Effect, Journal of Financial Economics, 8, 55–69, DOI: http://dx.doi.org/10.1016/0304-405X(80)90021-5.

French, K.R., Roll, R. (1986), Stock Returns Variances: The Arrival of Information of the Reaction of Traders, Journal of Financial Economics, 17, 5–26.

Gibbons, M., Hess, P. (1981), Day of the Week Effects and Asset Returns, Journal of Business, 54, 579–596, DOI: http://dx.doi.org/10.1086/296147.

Hameed, A., Kang, W., Viswanathan, S. (2010), Stock Market Declines and Liquidity, Journal of Finance, 65(1), 257–293, DOI: http://dx.doi.org/10.1111/j.1540-6261.2009.01529.x.

Hamilton, J.D. (2008), Macroeconomics and ARCH, Working Paper 14151, NBER Working Paper Series, Cambridge.

Jain, P.C., Joh, G.-H. (1988), The Dependence between Hourly Prices and Trading Volume, Journal of Financial and Quantitative Analysis, 23(3), 269–284.

Karolyi, G.A., Lee, K.-H., van Dijk, M.A. (2012), Understanding Commonality in Liquidity Around the World, Journal of Financial Economics, 105(1), 82–112, DOI http://dx.doi.org/10.1016/j.jfineco.2011.12.008.

Kiymaz, H., Berument, H. (2003), The Day of the Week Effect on Stock Market Volatility and Volume: International Evidence, Review of Financial Economics, 12(4), 363–380, DOI: http://dx.doi.org/10.1016/S1058-3300(03)00038-7.

Lesmond, D.A. (2005), Liquidity of Emerging Markets, Journal of Financial Economics, 77(2), 411 –452, DOI: http://dx.doi.org/10.1016/j.jfineco.2004.01.005.

Lucchetti, J., Balietti, S. (2014), The gig Package, Version 2.14.

Newey, W.K., West, K.D., (1987), A Simple, Positive Semi-Define, Heteroskesticity and Autocorrelation Consistent Covariance Matrix, Econometrica, 55(3), 703–708, DOI: http://dx.doi.org/10.2307/1913610.

Nowak, S., Olbryś, J. (2015), Autokorelacja stóp zwrotu spółek giełdowych w kontekście zakłóceń w procesach transakcyjnych (Serial Correlation of Individual Stock Returns in the Context of Friction in Trading Processes), Zeszyty Naukowe Uniwersytetu Szczecińskiego No. 854. Finanse, Rynki Finansowe, Ubezpieczenia, 73, 721 –734.

Olbryś, J. (2014a), Is Illiquidity Risk Priced? The Case of the Polish Medium-Size Emerging Stock Market, Bank i Kredyt, 45(6), 513–536.

Olbryś, J. (2014b), Wycena aktywów kapitałowych na rynku z zakłóceniami w procesach transakcyjnych (Capital Asset Pricing on Market with Frictions in Trading Processes), Difin Press, Warszawa.

Rogalski, R.J. (1984), New Findings Regatding Day-of-the-Week Returns Over Trading and Nontrading Periods: A Note, Journal of Finance, 35, 1603–1614.

Tsay, R.S. (2010), Analysis of Financial Time Series, John Wiley, New York.

Žikeš, F., Bubák, V. (2006), Seasonality and the Non-Trading Effect on Central European Stock Markets, Czech Journal of Economics and Finance, 56, 69–79.






ISSN (print) 1234-3862
ISSN (online) 2450-7067

Partnerzy platformy czasopism