May

10

Same-Weekday Momentum

May 10, 2024 |

Same-Weekday Momentum
Zhi Da, University of Notre Dame - Mendoza College of Business
Xiao Zhang, University of Maryland - Robert H. Smith School of Business
Apr 24, 2024

A disproportionately large fraction (70%) of stock momentum reflects return continuation on the same weekday (e.g., Mondays to Mondays), or the same-weekday momentum. Even accounting for partial reversals in other weekdays, the same-weekday momentum still contributes to a significant fraction (20% to 60%) of the momentum effect. This pattern is robust to different size filters, weighing schemes, time periods, and sample cuts. The same-weekday momentum is hard to square with traditional momentum theories based on investor mis-reaction. Instead, we provide direct and novel evidence that links it to within-week seasonality and persistence in institutional trading. Overall, our findings highlight institutional trading as an important driver of the stock momentum.

Peter Ringel writes:

I find this a sexy area of research. It also effects the indices. My guess is some sort of behavioral bias among large players plus some technical constraints, how they have to enter complex trades. Why is a certain fund buying the sector every Tuesday at 10:30? I see such regularities pop up, exist for a while - and vanish again.

Big Al does some counting:

Here is a quick, simple study just to kick this can. This is looking at NVDA, days of the week, for about the last year. The z scores show Wednesday being a significantly poor day and Thursday being good (but with a big sd).

I also did a thousand sim runs, resorting the % changes randomly, and pulled out the max-min spread for each sim run. For the actual data, the range is 1.86% points (Thursday mean minus Wednesday mean). Only 2.08% of the sim runs had a wider range. Taking that to a z score table gives the actual range a score of +2.03.

However, here is the correlation for each weekday predicting the next trading day that is the same weekday:

NVDA correlations, weekday to next instance
Mon-Mon 0.06
Tues-Tues 0.04
Wed-Wed 0.03
Thurs-Thurs 0.09
Fri-Fri 0.01


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