Edith Cowan University
Place of Publication
Joondalup, Western Australia
Faculty of Business and Public Management
School of Finance and Business Economics
Day of the week (DOW) effect has been well known in many markets. The United States, the United Kingdom, Canada, and Switzerland all have been found to exhibit significant average negative Monday returns [Agrawal and Tandon, 1998]. Other developing markets in Indonesia, Malaysia and Thailand are also found to have the same seasonality [Choudhry, 2000]. Australia however displays its DOW effect on Tuesdays rather than on Mondays (Jaffe and Westerfield , Easton and Faff ). Jaffe and Westerfield  suggest that there might be a linkage between the U.S. Monday seasonal and the Asia-Pacific DOW effect as they are one day out of phase due to different time zone. Since then, a few studies have examined the relationship of daily returns among the markets. But to our knowledge, no study has directly investigated the relationship between U.S. Monday and Australia Tuesday effect. We therefore re-examine the anomaly and document that the DOW effect in Australia is Granger caused by the weekend effect in U.S. and not the other way conditional on the weekend effects in the U.K. and Japanese markets. We also find that in the post 1987 period, where the U.S. Monday returns are positively significant, Australia Tuesday returns also reverses its effect. This latter finding provides further evidence that the anomaly in Australia is induced by the weekend effect in the U.S.