Why the market just loves Fridays

If stock market data is any indication, traders have made more money on Fridays, the closing day of a trading week, than on any other.

Over the last five years, the BSE Sensex, for one, has given an average return of 0.17 per cent on Fridays.

Talk about last minute rush and the resultant increase in activity on the counters; or a perception that one knows better at the fag end of the week.

Therefore, here's a hot tip day traders could take -- never miss the action on a Friday.
On the flip side, Mondays are the bleakest. Over the last five years, the Sensex has given an average return of just 0.06 per cent on Mondays, the lowest for any day.

That makes for a second tip, perhaps -- give Mondays a pass if you want an extended weekend. Also, the markets tend to be the most volatile on Mondays, meaning price fluctuations are the biggest on this day.

In terms of standard deviation, a measure of volatility, in the last five years, the Sensex has swung the wildest on Mondays (2.37 per cent), followed by Friday (2.08 per cent). Wednesday, Thursday and Tuesday have seen standard deviations of 1.84 per cent, 1.73 per cent and 1.67 per cent and returns of 0.13 per cent, 0.07 per cent and 0.09 per cent, respectively.

There again, on a risk-return ratio basis, there's nothing like a Friday if you are a day trader.

Call it the "weekend effect" if you will, or the "day-of-the-week effect."
It's the same for the Nifty as well -- Fridays have the highest returns (0.17 per cent) and Mondays the lowest (0.05 per cent).

The trend, in fact, holds for markets the world over.

"Published research for the United States and Canada finds that daily stock market returns tend to be lower on Mondays and higher on Fridays," Syed A Basher and Perry Sadorsky of York University write in a research paper titled 'Day-of-the-week effects in emerging stock markets'.

This is primarily attributed to companies releasing unfavourable news over the weekend, when the markets are closed.This news is reflected in the stock prices when the markets open again on Mondays.