Stephen Keef, Ph.D., Mohammed Khaled, Ph.D., and Hui Zhu, MA. School of Economics and Finance, Victoria University of Wellington, PO Box 600, Wellington, 6001, New Zealand
This examination of the temporal dynamics of the international Monday effect is based on 50 countries. Observed between-country differences are characterised by an economic factor based on four indices: GDP, information and communication technology, economic freedom and corruption. The prior day effect captures the tendency for price changes to follow those on the prior day. A bad (good) day occurs when the price change on the prior day is negative (positive). A panel regression (allowing unobserved random country effects) with panel corrected standard errors, is used to characterise the way that the Monday effect and the cognate prior day effect systematically vary between-countries over the period 1994 to 2006. At the start of the data in 1994, there is a considerable prior day effect which is larger for poor countries. This between-country difference declines over time and has essentially disappeared by 2006. The bad non-Monday effect and the bad Monday effect also decline over time. However, they follow a parallel temporal path. This argues that the Monday effect has not ameliorated over time.