The day-of-the-week effect in Swedish stock returns

Abstract: One implication of the Efficient Market Hypothesis (EMH) is that it is not possible to consistently and over time create abnormal returns without taking on additional risk. However, the hypothesis has become one of the most debated theories in financial economics. Numerous studies suggest that seasonal patterns exist in stock returns, so-called calendar effects, which violates the assumption of stock market efficiency. In contribution to this literature, the present study aims to investigate the day-of-the-week effect on the Swedish stock market in small, mid, and large-capitalization stocks. This study reports positive day-of-the-week effects among small and mid-capitalization stocks, both for raw returns and for risk-adjusted returns, but finds no such effects for large-capitalization stocks. However, the observed day-of-the-week effects do not prevail consistently over time, which indicates only weak evidence against the EMH.