# Understanding the Weekend Effect in Stock Markets

![Weekend Effect: The phenomenon of stock returns often being notably lower on Mondays than the preceding Friday.](https://www.investopedia.com/thmb/DAV_zD-Btx-DWixG30iOQULgjGI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Weekend-effect-final-2a9c16c43bf34e26914c0fdd59e1f42a.png)

*One theory for the Weekend Effect is the tendency of companies to release bad news after market close on Friday, which might have the effect of depressing stock prices on Monday. — Investopedia / Zoe Hansen*

## What Is the Weekend Effect?

Stock returns frequently dip on Mondays compared to the preceding Friday, a recurrent pattern known as the Weekend Effect. It raises questions about trading behaviors and company practices that contribute to this financial anomaly.

(The weekend effect is sometimes known as the [Monday effect](https://www.investopedia.com/terms/m/mondayeffect.asp), although that theory states that returns on the [stock market](https://www.investopedia.com/terms/s/stockmarket.asp) on Mondays will follow the prevailing trend from the previous Friday. If the market was up on Friday, it should continue through the weekend and, come Monday, resume its rise, and vice versa. )

Here’s how the weekend effect works.

### Key Takeaways

*   The weekend effect describes the tendency for stock returns on Mondays to be lower than those on the prior Friday.  
    
*   Frank Cross first documented this phenomenon in 1973, noting negative returns typically appear on Mondays after Friday gains.  
    
*   Individual investor behavior, such as increased selling on Mondays and reactions to Friday's after-hours news releases, may contribute to the weekend effect.  
    
*   Though historically persistent, the weekend effect's impact has varied, disappearing between 1987 and 1998 before resurging.  
    
*   Research suggests alternative explanations, such as short selling and varying effects based on company size, also factor into this trend.  
    

## Analyzing the Weekend Effect in Financial Markets

One explanation for the weekend effect is the tendency of humans to act irrationally; the trading behavior of individual investors appears to be at least one factor contributing to this pattern. When uncertain, people often make choices that aren't the best. At times, the [capital markets](https://www.investopedia.com/terms/c/capitalmarkets.asp) reflect the irrationality of their participants, especially when considering the high volatility of stock prices and the markets; investors’ decisions may be impacted by external factors (and sometimes unconsciously). In addition, investors are more active sellers of stock on Mondays, especially following bad news in the market.

In 1973, Frank Cross wrote about negative Monday returns in an article published in the _Financial Analysts Journal_. In the article, he shows that the average return on Fridays exceeded the average return on Mondays, and there is a difference in the patterns of price changes between those days. Stock prices often drop on Mondays, after rising on Fridays, leading to frequent low or negative returns from Friday to Monday.

Some theories suggest companies release bad news on Fridays, which lowers stock prices on Mondays. Others state that the weekend effect might be linked to [short selling](https://www.investopedia.com/terms/s/shortselling.asp), which would affect stocks with high [short interest](https://www.investopedia.com/terms/s/shortinterest.asp) positions. Alternatively, the effect could simply be a result of traders’ fading optimism between Friday and Monday.

The weekend effect has been a regular feature of stock trading patterns for many years.  A [Federal Reserve](https://www.investopedia.com/terms/f/federalreservebank.asp) study found that before 1987, weekend returns were often negative. However, the study did mention that this negative return had disappeared in the period from 1987 to 1998. Since 1998, weekend volatility has risen again, and the cause of the weekend effect is still debated.

## Exploring the Reverse Weekend Effect

Opposing research on the “reverse weekend effect” has been conducted by a number of analysts, who show that Monday returns are actually higher than returns on other days. Some research shows the existence of multiple weekend effects, depending on firm size, in which small companies have smaller returns on Mondays and large companies have higher returns on Mondays. The reverse weekend effect has also been postulated to occur only in stock markets in the United States.

## The Bottom Line

The weekend effect is a notable anomaly where stock returns on Mondays often trend lower than on the preceding Friday. Various factors, such as irrational investor behavior and the timing of negative news releases by companies, contribute to this pattern. While its prevalence has fluctuated over time, understanding the weekend effect can offer investors insights into market behavior and strategic opportunities. Investors should remain mindful of how these dynamics may influence short-term trading decisions, keeping in view that research indicates varying effects based on company size and market conditions."

> **Article Sources**
>
> 1.  Financial Analysts Journal, via Daily Speculations. “[The Behavior of Stock Prices on Fridays and Mondays](https://dailyspeculations.com/scholarly/faj.v29.n6.67.pdf).”
>     
> 2.  Brusa, Jorge Omar R. et al., via SSRN. “[Weekend Effect, ‘Reverse’ Weekend Effect, and Investor Trading Activities](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=495963).”