Day-of-the-Week Effect and Spread Determinants: Some International Evidence From Equity Markets

We investigate the day-of-the-week effect in relation to bid ask spreads determinants by employing a comprehensive dataset of international equity markets from 2000 until 2015 incorporating different market phases, such as various booms and crashes. To this end, we apply a battery of tests regarding returns patterns and a panel cointegration technique. Given that there is growing evidence that stock markets behave differently on different days of the week, we find that there is significant evidence in favor of an international day-of-the-week effect concerning the impact of prices, volatility and volume on bid ask spreads. A panel error correction model allows us to infer a day-of-the-week effect in the speed of adjustment of spreads. Our results entail significant implications for investors, market regulators and policy-makers.