Justin Birru at Ohio State University has shown that speculative stocks tend to do unusually badly on Mondays but well on Fridays. For example, he estimates that between 1963 and 2013 US stocks that did not pay dividends underperformed dividend payers by an annualised 6.4 per cent on Mondays but outperformed them by four percentage points on Fridays.
This is no isolated quirk. He shows that other types of speculative stock also underperform safer ones on Mondays but outperform on Fridays. This is true for volatile stocks relative to less volatile ones; for penny stocks relative to higher-priced ones; and for lottery-type stocks relative to more defensive ones.
Nor is the pattern confined to the US. Since the start of last year the FTSE Aim index has fallen by an average of 0.21 per cent on Mondays, but risen by an average of 0.17 per cent on Fridays.
This pattern doesn't exist because important US economic data, such as the labour market report, are released on Fridays. Professor Birru estimates that the pattern holds even ignoring those Fridays on which important data are published.
Instead, he says, it is because Mr Domino was right: we hate Mondays. It's not just introspection that tells us this. So too does research. Scott Golder and Michael Macy at Cornell University have analysed over 500m tweets and found that these were more cheerful on Fridays than on Mondays. What's true for tweeters is also true for financial markets. Professor Birru points out that both Treasury bond prices and the Vix index (the so-called 'fear gauge') tend to rise on Mondays. This is consistent with investors being more pessimistic then.
None of this means you should sell speculative stocks and Aim shares on Fridays and buy them back in mid-week: dealing costs would offset any profits you make from doing so. Instead, there are two other implications here.
One is that you shouldn't read much into day-to-day price moves. If your speculative holdings do badly on Mondays, don't be disheartened: it's part of a normal pattern. And if they do well on Fridays, don't take it as evidence that you're a great stock-picker or the start of a trend.
Secondly, all this is yet more evidence that share prices are swayed not (just) by a sober assessment of 'fundamentals' but by sentiment. The Monday effect in speculative stocks is consistent with evidence that share prices are affected by the weather and by the time of year.
All this offers hope for equity investors. The more likely it is that shares are affected by sentiment, the more likely we are to see prices rise in the spring as the nights get lighter and investors become more optimistic.
