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Table 3 Day-of-the-week effect and mood

From: Day-of-the-week returns and mood: an exterior template approach

  VW EW 1 2 3 4 5 6 7 8 9 10
Panel A: 2007 scores
 λ0 -0.2899 -0.6905 -0.9099 -0.8949 -0.8544 -0.8172 -0.7357 -0.6647 -0.5852 -0.5039 -0.4621 -0.2288
 Newey-West S.E. 0.0502 0.0417 0.0446 0.0412 0.0424 0.0439 0.0461 0.0484 0.0496 0.0489 0.0494 0.0520
 t-statistic -5.77 -16.56 -20.40 -21.72 -20.15 -18.62 -15.96 -13.73 -11.80 -10.30 -9.35 -4.40
p-value 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
 λ1 0.0467 0.1114 0.1467 0.1443 0.1378 0.1318 0.1186 0.1072 0.0944 0.0813 0.0745 0.0369
 Newey-West S.E. 0.0079 0.0063 0.0067 0.0061 0.0063 0.0066 0.0070 0.0073 0.0075 0.0075 0.0076 0.0082
 t-statistic 5.94 17.80 22.03 23.69 21.84 20.09 17.04 14.60 12.52 10.87 9.83 4.51
p-value 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
 R2 0.0023 0.0189 0.0269 0.0311 0.0274 0.0243 0.0179 0.0137 0.0101 0.0075 0.0063 0.0013
 Adjusted R2 0.0022 0.0188 0.0268 0.0310 0.0274 0.0243 0.0178 0.0136 0.0100 0.0075 0.0063 0.0013
 Proportion of the effect explained by mood 39.5% 73.8% 87.4% 84.5% 81.9% 79.8% 72.4% 67.3% 62.3% 55.2% 53.4% 30.8%
Panel B: Farber scores
 λ0 -0.3571 -0.7526 -0.9250 -0.9355 -0.9060 -0.8740 -0.8047 -0.7345 -0.6557 -0.5772 -0.5319 -0.2963
 Newey-West S.E. 0.0521 0.0428 0.0460 0.0423 0.0436 0.0451 0.0474 0.0496 0.0508 0.0502 0.0506 0.0540
 t-statistic -6.85 -17.58 -20.11 -22.12 -20.78 -19.38 -16.98 -14.81 -12.91 -11.50 -10.51 -5.49
p-value 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
 λ1 0.0576 0.1213 0.1491 0.1508 0.1460 0.1409 0.1297 0.1184 0.1057 0.0930 0.0857 0.0478
 Newey-West S.E. 0.0081 0.0064 0.0068 0.0062 0.0064 0.0067 0.0071 0.0074 0.0077 0.0076 0.0077 0.0084
 t-statistic 7.12 19.10 21.83 24.28 22.78 21.16 18.35 15.91 13.82 12.24 11.14 5.66
p-value 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
 R2 0.0033 0.0212 0.0263 0.0321 0.0292 0.0263 0.0202 0.0158 0.0120 0.0093 0.0079 0.0021
 Adjusted R2 0.0032 0.0212 0.0262 0.0321 0.0291 0.0263 0.0201 0.0158 0.0119 0.0093 0.0079 0.0020
 Proportion of the effect explained by mood 56.7% 82.9% 85.3% 87.3% 87.0% 86.3% 81.9% 77.7% 73.9% 68.4% 66.9% 48.8%
Panel C: Simple average
 λ0 -0.3266 -0.7297 -0.9287 -0.9260 -0.8904 -0.8553 -0.7788 -0.7073 -0.6272 -0.5462 -0.5022 -0.2649
 Newey-West S.E. 0.0513 0.0425 0.0455 0.0419 0.0432 0.0447 0.0469 0.0493 0.0505 0.0498 0.0503 0.0532
 t-statistic -6.37 -17.17 -20.41 -22.10 -20.61 -19.13 -16.61 -14.35 -12.42 -10.97 -9.98 -4.98
p-value 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
 λ1 0.0526 0.1176 0.1497 0.1493 0.1436 0.1379 0.1256 0.1140 0.1011 0.0881 0.0810 0.0427
 Newey-West S.E. 0.0080 0.0063 0.0068 0.0062 0.0064 0.0067 0.0071 0.0074 0.0076 0.0076 0.0077 0.0083
 t-statistic 6.58 18.55 22.08 24.16 22.47 20.74 17.82 15.34 13.23 11.64 10.56 5.12
p-value 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
 R2 0.0028 0.0203 0.0269 0.0320 0.0286 0.0256 0.0192 0.0149 0.0111 0.0085 0.0072 0.0017
 Adjusted R2 0.0027 0.0202 0.0268 0.0319 0.0286 0.0256 0.0192 0.0148 0.0111 0.0084 0.0071 0.0016
 Proportion of the effect explained by mood 48.2% 79.1% 87.4% 86.9% 85.4% 84.0% 77.9% 73.2% 68.7% 62.3% 60.6% 39.7%
Panel D: Weighted average
 λ0 -0.3175 -0.7209 -0.9259 -0.9199 -0.8829 -0.8471 -0.7691 -0.6976 -0.6174 -0.5362 -0.4927 -0.2559
 Newey-West S.E. 0.0510 0.0423 0.0453 0.0418 0.0430 0.0446 0.0468 0.0491 0.0503 0.0496 0.0501 0.0529
 t-statistic -6.23 -17.04 -20.44 -22.01 -20.53 -18.99 -16.43 -14.21 -12.27 -10.81 -9.83 -4.84
p-value 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
 λ1 0.0512 0.1162 0.1493 0.1483 0.1424 0.1366 0.1240 0.1125 0.0996 0.0865 0.0794 0.0413
 Newey-West S.E. 0.0080 0.0063 0.0068 0.0062 0.0064 0.0066 0.0070 0.0074 0.0076 0.0076 0.0077 0.0083
 t-statistic 6.42 18.39 22.09 24.07 22.32 20.60 17.64 15.18 13.07 11.44 10.37 4.98
p-value 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
 R2 0.0027 0.0200 0.0270 0.0318 0.0284 0.0253 0.0189 0.0146 0.0109 0.0083 0.0070 0.0016
 Adjusted R2 0.0026 0.0199 0.0269 0.0318 0.0283 0.0253 0.0189 0.0146 0.0108 0.0082 0.0069 0.0015
 Proportion of the effect explained by mood 45.9% 77.9% 87.6% 86.5% 84.7% 83.0% 76.6% 71.8% 67.1% 60.5% 58.8% 37.3%
  1. Table 3 provides analysis of the day-of-the-week effect with mood as the explanatory variable. The results are reported in four panels corresponding to four types of mood scores presented in Table 1 (columns 1, 3, 4 and 5 in Table 1). The regression coefficient of the mood variable is positive and statistically significant for all deciles and portfolios suggesting that the behavioral hypothesis is a possible explanation for the day of the week effect. The bottom line of each panel presents the proportion of the daily variation of average abnormal returns explained by mood, measured as the ratio of the R2 of the mood variable regression to the R2 of the respective dummy variable regression. Using the simple average mood template (Panel C), these proportions are approximately 79% and 48% for the EW and VW portfolios, respectively. The results for the R2 ratios are declining with size suggesting that the ability of mood to explain the day-of-the-week effect declines with market capitalization. All the tests are adjusted for heteroscedasticity and serial correlation using Newey-West standard errors