A week ago I arrived at work and noticed that about 10 people wore the same coloured baby blue shirt, myself included. When asked if it was planned or just a coincident, majority jokingly replied by say “it’s a Blue Monday”. In as much as I believe it was a mere coincident, I couldn’t help but wonder if there was more to this.
Alexander Kjerulf (Forbes, 2013) described a Blue Monday as a set of negative emotions that many people get at the beginning of the workweek normally due to unhappiness at work. It contains elements of depression, tiredness, hopelessness and a sense that work is unpleasant but unavoidable. Monday blues are contagious, hence their impact is understandable in a work environment where there’s physical contact, surprisingly it does not end there as financial markets are impacted too.
Financial Markets are known to be efficient, hence the efficient market hypothesis (EMH) that states that at any given time prices fully reflect all available information on a particular financial market.
However there are market anomalies that contradict the EMH, such as the time series Monday effect anomaly which suggests that returns on other Mondays are less than any other day of the week.
An unsettled debate has been whether the Monday effect is driven by individual or institutional investors. Individual investors tend to have more sell orders on Mondays, whereas institutional investors tend to have fewer transactions on Mondays or if they have more or “normal” transactions then they result in large negative returns; however both types of investors are influenced by information received on Friday or over the weekend.
Clearly the Monday effect is driven by both types of investors, interesting enough the mood of investors play a significant role as most of them tend to be pessimistic on Mondays. This is called the Blue Monday Hypothesis, where investors take fewer risks on their investments. Therefore knowing certain investor behaviors is advantageous as it could be very profitable.So next time you consciously embrace a Blue Monday think of all the untapped profits rooming around in the financial markets streets waiting for you to cease! LOL
ReferencesBrooks, R.M & Hongshik, K. (1997). The Individual Investor and the Weekend Effect: A Reexamination with Intraday Data. The Quarterly Review of Economics and Finance, 37(3):725-737.https://www.sciencedirect.com/science/article/abs/pii/S106297699790020X
Pettengill, G.N. (1993). An experimental study of the “blue-monday” hypothesis. The Journal of Socio-Economics,22(3):241-547.https://www.sciencedirect.com/science/article/abs/pii/1053535793900119
Singleton, J.C. & Wingender, J.R (2003). The Monday Effect: A Disaggregation Analysis. Quarterly Journal of Business and Economics, 42(3/4):91-111.https://www.jstor.org/stable/23292842?seq=1#page_scan_tab_contents
Smith, J. (2013). 11 Ways to Beat the Monday Blues. Forbes.https://www.forbes.com/sites/jacquelynsmith/2013/02/25/11-ways-to-beat-the-monday-blues/#54c7078823f5
Yilmaz, O. (2013). Between-country differences in the Monday Effect: Evidence from European Equity Markets. Tilburg University,1-29.http://arno.uvt.nl/show.cgi?fid=126947