Session 10_ Post-class test

B the negative monday returns should be reversed over

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Unformatted text preview: ades. One explanation that is offered for the Monday effect is that companies report a disproportionate amount of bad news after the close of trading on Friday and that the Monday reaction reflects the bad news. If this story holds, which of the following would you expect to see in Monday returns? a. Almost all of the negative return should come from stocks opening lower on Monday than from returns over the course of the day. b. The negative Monday returns should be reversed over the course of the remaining weekdays. c. The Monday return should be most negative for companies that had large positive returns on Friday. d. The Monday return should be most negative for companies that had large negative returns on Friday. e. The Monday return should be more negative for companies that are most liquid. 4. Assume that Monday returns are caused by companies sitting on bad news until after the close of trading on Friday. Is there a strategy that you can use to exploit this tendency to make money? a. Yes b. No Explain. 5. There is some evidence that the weekend effect has shifted over the last two decades, with Fridays (rather than Mondays) becoming the worst day of the week to invest in US stocks over the last decade. a. True b. False If true, what might explain thi...
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This note was uploaded on 10/10/2013 for the course ECON 304 taught by Professor Aswathdamodaran during the Spring '12 term at NYU.

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