The Day Of The Week Effect On Warrant Returns

The presence of calendar anomalies has been documented extensively for the last two decades in financial markets. The most common ones are the January Effect and the Day of the Week Effect. The day of the week patterns have been investigated extensively in different markets including the equity market, futures market, and bond market.This study tests the presence of the day of the week effect on three warrant markets'returns(Shenzhen put warrant market, Shanghai put and call warrant markets ) by using 13 warrants'daily returns'data during the period of July 2006 and March 2007.Two different models are employed. The first model, which assumes the constancy of the residual term's variance, is OLS. The findings based on this model indicate that day of the week effect is present in the return equation. The highest return is observed on Monday in three warrant markets, while the lowest return is observed on Friday in two put warrant markets and on Thursday in Shanghai call warrant market. In the second model, we allow volatility to change over time. Although this model provides more efficient estimates of parameters (lower standard errors of the estimates), the findings are similar to those of the first model. Specifically, the lowest return is observed on Friday in two put warrant markets and on Thursday in shanghai call warrant market , while the highest return is observed on Monday in all three warrant markets. All of these findings are statistically significant excluding the average Thursday return of Shanghai call warrant market.