Why buy now pay later stocks fall Tuesdays and rise Fridays

Tuesday blues

In addition to the Monday blues effect, Zhong found a unique Tuesday blues effect in speculative stocks.

“Australia is 14 hours ahead of the US, so a Tuesday trading day in Australia corresponds to Monday in the US,” she says.

“Being the largest economy in the world, the US is the bellwether and its sentiment spills over to the Australian market.”

This means speculative stocks generate lower returns on both Mondays and Tuesdays in Australia, she explains.

Why mood swings impact the market cycle

Psychological studies show that people are affected by mood when making decisions and tend to respond to stimuli more positively when in a good mood and vice versa, Zhong notes.

The impact of mood on decision making is pronounced when people are facing uncertainty, she adds.

“In the context of stock markets, making a decision with highly uncertain information corresponds to the valuation of speculative stocks, which are young, growing and highly volatile,” she says.

“Mood improves gradually from Monday to Friday ranging from the Monday blues to ‘thank god it’s Friday’.”

That means, investors are more pessimistic on Monday, thus pushing the prices of speculative stocks down.

“Investors are happier on Friday, hence viewing speculative stocks more favourably, and pushing prices up,” Zhong concludes.

Story: Diana Robertson

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Why buy now pay later stocks fall Tuesdays and rise Fridays