JOURNAL OF ECONOMICS AND FINANCE • Volume 25 • Number 2 • Summer 2001 181 The Day of the Week Effect on Stock Market Volatility Hakan Berument and Halil Kiymaz * Abstract This study tests the presence of the day of the week effect on stock market volatility by using the S&P 500 market index during the period of January 1973 and October 1997. The findings show that the day of the week effect is present in both volatility and return equations. While the highest and lowest returns are observed on Wednesday and Monday, the highest and the lowest volatility are observed on Friday and Wednesday, respectively. Further investigation of sub-periods reinforces our findings that the volatility pattern across the days of the week is statistically different. (JEL G10, G12, C22) Introduction The presence of calendar anomalies has been documented extensively for the last two decades in financial markets. The most common ones are the January Effect and the Day of the Week Effect. The day of the week patterns have been investigated extensively in different markets. Studies (Cross 1973; French 1980; Keim and Stambaugh 1984; Rogalski 1984; Aggarwal and Rivoli 1989) document that the distribution of stock returns varies according to the day of the week. The average return on Monday is significantly less than the average return over the other days of the week. The day of the week regularity is not limited to the U.S. equity market. It is also documented that the day of the week regularity is present in other international equity markets (Jaffe and Westerfield 1985; Solnik and Bousquet 1990; Barone 1990, among others) and other financial markets including the futures market, Treasury bill market, and bond market (Cornell 1985; Dyl and Maberly 1986). While the focus of the studies above has been the seasonal pattern in mean return, recently many empirical studies have investigated the time series behavior of stock prices in terms of volatility by using variations of the generalized autoregressive conditional heteroskedasticity (GARCH) models (French, Schwert, and Stambaugh 1987; Akgiray 1989; Baillie and DeGennaro 1990;Hamao, Masulis, and Ng 1990; Nelson 1991; Campbell and Hentschel 1992; Glosten, Jagannathan and Runkle 1993). However, none of these studies examine if there is any day of the * Hakan Berument, Bilkent University, Ankara, Turkey; Halil Kiymaz (corresponding author), Department of Finance, SBPA, University of Houston-Clear Lake, Houston, TX 77058, kiymaz@cl.uh.edu. The authors would like to thank anonymous referees, Joachim Zietz (JEF editor), Aslıhan Salih Altay, Kürsat Aydogan, Umur ˙elikyay, and Ramazan Gencay for helpful comments.