Weekend Effect
Categories: Financial Theory
The mood of most working folks on Monday is typically quite gloomy and low. Conversely, on Friday, these folks are high on life, walking with pizzazz straight into the weekend with a quick (or not so quick) stop at Happy Hour. The stock market experiences similar mood changes.
The optimistic mood of investors on Friday is believed to typically create an upward shift in stock prices. Theoretically, investors are not only emptying their pockets at Happy Hour, they are doing so within their trade accounts as well. On Monday, when investors are down in the dumps, weekend stock prices tend to fall. This drop in stock prices reflects the all too well-known mood change from Friday to Monday.