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Comments

Paul Teetor

Dear Bespoke Group:

Thanks for this posting. This is an interesting way to consider volatility leading up to options expiration.

I am wondering, however, if we can really rank the weekdays according to mean return, especially based on such a small sample. When I applied a t-test to your data, I found these confidence intervals for the mean return on Tuesdays, Wednesdays, and Thursday:

Tuesday: [-0.422, 0.516]

Wednesday: [-0.127, 0.637]

Thursday: [-0.058, 0.517]

As you can see, the confidence intervals are quite wide, and they overlap significantly. It appears we cannot easily compare means for different days, since the true means could be very far from the sample means.

Thanks again.

MJ

Interesting. As an addendum to your data, take a look at the link below for returns on the Monday following options expiration (and more importantly, the impact Friday's results have on that Monday): http://www.marketsci.com/studies/20070228.01.html

TechFarm

I did a similar study of S&P 500 returns by day of week from 1962 to 2007:

http://techfarm.blogspot.com/2007/08/s-500-returns-by-day-of-week-1962-2007.html

Monday is the only negative return day, Wednesday is the best return day.

Tuesday has the largest trading range, and Wednesday has the highest relative volume.

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