Does mood explain the Monday effect?

Abu Bakar, A., Siganos, A. and Vagenas-Nanos, E. (2014) Does mood explain the Monday effect? Journal of Forecasting, 33(6), pp. 409-418. (doi: 10.1002/for.2305)

Abstract

A number of studies have explored the sources of the Monday effect, according to which returns are on average negative on Mondays. We contribute to the literature by exploring whether a direct measure of mood explains the Monday effect. In line with psychological literature, a greater proportion of investors is more pessimistic in the early days of the week, and become more optimistic as the week progresses. We use novel daily mood data from Facebook across twenty international markets to explore the impact of mood on the Monday anomaly. We find that the Monday effect disappears after controlling for mood. In line with our hypothesis that mood drives the Monday effect, we find that the Monday effect is more prominent within small capitalisation indices and within collectivist and high uncertainty avoidance countries. Investors could consider mood levels to forecast Mondays with more (less) pronounced negative returns.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Vagenas-Nanos, Professor Evangelos and Siganos, Professor Antonios
• Authors: Abu Bakar, A., Siganos, A., and Vagenas-Nanos, E.
• College/School: College of Social Sciences > Adam Smith Business School
• Journal Name: Journal of Forecasting
• Publisher: Wiley
• ISSN: 0277-6693
• ISSN (Online): 1099-131X
• Copyright Holders: Copyright © 2014 John Wiley & Sons, Ltd.
• First Published: First published in Journal of Forecasting 33(6):409-418
• Publisher Policy: Reproduced in accordance with the copyright policy of the publisher