Another look at the Tuesday effect in Australia

Weekend effects have been well known in many financial markets. Australia however displays its effect on Tuesdays rather than on Mondays. In this study, we investigate on the possible linkage between the US Monday and Australian Tuesday returns. We document that the Tuesday effect in Australia is one-way Granger caused by the weekend effect in the US conditional on the weekend effects in the UK and Japanese markets. Furthermore, in the post-1987 period where the US Monday returns are positively significant, the Australian Tuesday return also turns out to be positive. This latter finding provides further evidence that the anomaly in Australia is induced by the weekend effect in the US.