This is why stock markets hate Mondays

Many people in the working world – across time and culture – hate Mondays because it’s the first day back at work after the weekend… and love Fridays because they’re the doorway to the weekend. It turns out that stock markets feel the same way.

Much of what happens in stock markets seems random. But there are some strong non-random patterns to stock market behaviour. For example, we’ve talked about whether the January barometer is a good indicator of performance for the rest of the year, and whether the “sell in May and go away” strategy actually works.

Add this to the list: Stock returns on Mondays are generally negative – and they’re lower than returns on any other day of the week.

Across the region, average returns are negative on Mondays. They average -0.07 percent for Singapore’s STI, -0.05 percent for Malaysia’s KLCI and -0.12 percent for Indonesia’s JCI. Only Hong Kong’s Hang Seng has a positive return on Mondays, averaging 0.02 percent. The MSCI Asia ex Japan index, which covers most Asian markets excluding Japan, doesn’t do well on Mondays, either. It has an average return of negative 0.05 percent on the first day of the week.

Average Daily Market Performance April 2006 - May 2016
It follows, then, that average returns on Mondays are also worse than the average daily return for each market. For example, on Mondaythrough Thursday the KLCI enjoys positive returns, on average – and only Monday is negative. For the STI, Monday’s return is more negative than that of the average Tuesday, which is the only other day of the week when stock market returns are negative.

Why does this happen? One possible reason for lousy stock market performance on Mondays is that companies sometimes release bad news about earnings or performance after markets close on Fridays. Since markets are closed on weekends, investors can’t act on the news until Monday. So, Monday is the day that markets processFridayafternoon’s bad news, resulting in weaker market performance.

Another theory is that individual investors don’t have time to put much thought into investment decisions during the week. But over the weekend, they may have time to have a closer look at their portfolios – resulting in some selling on Monday.

Whatever the reason, this is a real phenomenon in Asian markets. But it doesn’t mean that you should look to sell on Fridays, and buy backon Monday afternoon. The differences in returns are small fractions of a percentage point. (And in any case, transaction costs would quickly surpass any “savings” from being out of the market on Mondays).

The day of the week that you buy or sell shouldn’t factor into your investment decision-making process. And if you’re buying high-quality investments at reasonable prices, a difference of five-hundredths of a percentage point won’t make any difference.

But even in today’s super-connected, hyperspeed market environment, stocks still behave in predictable ways that defy easy explanation. And it shows that company fundamentals aren’t the only things that affect stock prices.

Kim Iskyan is a former research director for an emerging market investment bank and hedge fund manager, and has spent the past 25 years exploring and analyzing global markets. Kim has been quoted in the Economist, The New York Times, the Wall Street Journal, Barron’s, and Bloomberg. He's appeared on Fox Business News, China Central Television, Bloomberg TV, and elsewhere. Kim is also the founder of Truewealth Publishing where he writes and shares his investment insights regularly.

Leave a Reply

Your email address will not be published. Required fields are marked *