Investor Psychology, Mood Variations, and Sustainable Cross-Sectional Returns: A Chinese Case Study on Investing in Illiquid Stocks on a Specific Day of the Week.

ABSTRACT: This paper uncovers a new finding of sustainable cross-sectional variations in stock returns explained by mood fluctuations across the days of the week. Long/short leg of illiquid anomaly returns are extensively related to the days of the week, and the magnitude of excess returns is also striking [Long leg refers to portfolio deciles that earn higher excess returns. Historical evidence suggests that more illiquid stock earn higher excess returns (Amihud, 2002; Corwin and Schultz, 2012)]. The speculative leg of illiquid anomalies is the long leg (Birru, 2018) [The speculative leg falls into the long leg of anomaly because more illiquid stocks are sensitive to investor sentiment (Birru, 2018)]. Therefore, the long (speculative) leg experiences more sustainable high returns on Friday than the

SUBMITTER: Ying Q 

PROVIDER: S-EPMC7043266 | biostudies-literature | 2020

REPOSITORIES: biostudies-literature