Definition
The term Monday effect is used to describe a historical trend, whereby the trading pattern of a financial market on the previous Friday will continue at the opening bell on Monday. The weekend effect is believed to be a result of increased investor pessimism on Saturday and Sunday.
Explanation
Financial markets, such as commodities, bonds, and stocks, typically demonstrate an upward or downward trend over time. The Monday effect is a hypothesis that states the trend at the closing bell in a Friday will pick up at the opening bell on Monday.
For example, if the S&P 500 Index were rising just before the closing bell on Friday, the Monday effect would result in a continuation of that increase at the opening bell on Monday. The definition of the Monday effect is slightly different than that of the weekend effect, which states financial markets have a tendency to decline on Monday. As is the case with the weekend effect, the Monday effect has been proven empirically via a number of studies; however, the cause of this phenomenon is oftentimes debated.
Related Terms
- The term weekend effect is used to describe a historical trend, whereby financial markets tend to decline more on Monday if there was a decline on the preceding Friday. The weekend effect is believed to be a result of increased investor pessimism on Saturday and Sunday.
Moneyzine EditorNovember 6th, 2024 - The term suckers' rally refers to a temporary increase in the value of a financial market or individual security, despite the lack of an improved outlook. A suckers' rally is classified as a secondary trend, since they are typically short in duration.Moneyzine EditorNovember 6th, 2024
The term January effect is used to describe a historical trend, whereby the prices of securities rise in the month of January. The January effect is classified as a secondary trend, since it is relatively short in duration.Moneyzine EditorNovember 6th, 2024
The term catching a falling knife refers to an investor purchasing a security as its price drops significantly. An investor will attempt to catch a falling knife when they believe a security's value is about to rebound.Moneyzine EditorNovember 6th, 2024
