An Empirical Study On The Day-of-the-week Effect Of China's Stock Market

The day-of-the-week effect means that in the stock markets, the return rate on one day is significant higher or lower than the rest other day during a week. Because this phenomenon of the stock return rate cyclical fluctuations in a week is difficult to explain in theory, it has been regarded as a stock market anomaly. A lot of literatures have showed that The day-of-the-week effect exists in most of the developed markets and the newly industried markets.Based on the dummy variables and Kruskal-Wallis nonparametric test(stock return difference),data from 1991 to 2007 of Shanghai and Shenzhen stock markets are used for estimation on day-of-the-week effect. Then if day-of-the-week effet exists, we use of autoregressive conditional heteroskedasticity type model (ARCH type model) verify whether there is a significant effect within weeks.After seeing about the existence of China's stock market overall day-of-the-week effect, the paper sizes company stocks to test whether day-of-the-week effect of different scale stock return exists. Domestic literature uses Shanghai Composite Index and Shenzhen Component Index to study day-of-the-week effect. But as data limitations they cannot study the relationship between company scale and day-of-the-week effect and study of the problem is still blank.Research shows that China's stock market on the whole does not exist day-of-the-week effect, but after sizing stock, large companies day-of-the-week effect exists. There is a positive "Wednesday effects" in Shanghai stock market and negative "Monday effect " and positive "Wednesday effect" in Shenzhen stock market.The existence of day-of-the-week effect reveals that there are some problems in information management and behavior of participants in China's stock market. So we give some advices on how to develop the China's stock market rapidly and healthly in the end of the paper.