Day-of-the-week Effects in the Swedish Stock Market: The Role of Size and Volatility

Abstract

This study investigates the day-of-the-week (DOW) effects in the Swedish stock market, focusing on the influence of different market capitalisations during various subperiods. The study investigates the Efficient Market Hypothesis (EMH) by analyzing daily returns of OMX Stockholm indices, segmented into small, mid, and large cap stocks, as well as OMXS30, between January 2017 to December 2023. The GARCH(1,1) model is used to account for time-varying volatility. The findings indicate significant DOW effects, particularly in small and mid cap stocks, which exhibit more pronounced anomalies. During the COVID-19 period, these effects are amplified, suggesting reduced market efficiency in high volatility environments. Notably, a reverse weekend effect is observed for OMXS30 and large cap indices during COVID-19.