Malaysian Evidence on the Robustness of the Day-of-the-week Effect

Abstract

‘The day-of-the-week effect is an empirical anomaly that has attracted substantial attention. Following the work of Connolly (1989) it is necessary to revisit previous empirical work. In this paper, we examine the day-of-the-weck effect in Malaysia over the period 1986-1993. The period spans some institutional changes in the Malaysian market, ie, abandoning the open outcry system of trading and severing links with the Singapore exchange. In addition to the usual tests, a GARCH model incorporating daily dummies in both the mean equation and the variance equation i presented. We are able to show that once the time varying volatility of the KLSE is modelled there is no day- of-the-week effect.