Su Han Chan Department of Finance, California State University-Fullerton Wai-Kin Leung Faculty of Business Administration, Chinese University of Hong Kong Ko Wang Department of Finance, California State University-Fullerton The Impact of Institutional Investors on the Monday Seasonal * I. Introduction One of the most noticeable anomalies docu- mented in the finance literature is the Monday seasonal. This anomalous Monday return pattern is observed not only in stock markets in the U. S. (see, for example, French (1980)) and other parts of the world (see, for example, Jaffe, Westerfield, and Ma (1989)), but also in debt markets (see, for example, Flannery and Proto- papadakis (1988)). Numerous explanations have been developed to rationalize the puzzling observations that the mean return on Monday is significantly negative and is lower than that on other weekdays (i.e., the Monday seasonal). One of the most plausible (Journal of Business, 2004, vol. 77, no. 4) B 2004 by The University of Chicago. All rights reserved. 0021-9398/2004/7704-0012$10.00 967 * The authors acknowledge helpful comments from Kalok Chan, John Erickson, Tsong Yue Lai, Laura Starks, John Wei, and seminar participants at the Hong Kong University of Science and Technology. The authors are indebted to an anonymous referee, whose detailed comments have significantly improved the paper. The usual disclaimer applies. It is well documented that the mean Monday return is significantly negative and is lower than the mean return on other weekdays. Using institutional stock holdings information during the 1981–1998 period, we document that the Monday sea- sonal is stronger in stocks with low institu- tional holdings and that the Monday return is not significantly differ- ent from the mean Tuesday to Friday returns for stocks with high institutional hold- ings during the 1990– 1998 period. Our study provides direct evi- dence to support the belief that the Monday seasonal may be related to the trading activities of less sophisticated individual investors.