Weekend Effect

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Definition: Weekend Effect

Weekend effect is a stock market effect which says that the Monday stock prices are lower than that on the Friday before. The underlying assumption is that sometimes it takes a weekend(which is off for trading) to understand the issues and news pertaining to a stock and the reaction comes out on Monday.

The main thing is that when shares are traded on a Monday, it involves sentiment of Saturday, Sunday and then Monday. Because 4 days before Friday were all working means the trading was more rational. Break of 2 days plus Friday evening changes the sentiments revolving around reports and news pertaining to stocks and market in general.

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