Workshop Series: Joshua Shemesh
We find that returns on options on individual equities display markedly lower returns over weekends (Friday close to Monday close) relative to any other day of the week. These patterns are observed both in unhedged and delta-hedged positions, indicating that the effect is not the result of a weekend effect in the underlying securities. Our results hold for puts and calls over a wide range of maturities and strike prices and remains strong in samples that include only the most liquid options. We find no evidence of a weekly seasonal in bid-ask spreads, trading volume, or open interest that could drive the effect. We also do not find evidence that weekend returns are significantly riskier than weekday returns, though the weekend effect does appear stronger when the riskiness of the market portfolio is high. Weekend returns are lower when the TED spread and market volatility are high, suggesting that limits to arbitrage may explain the persistence of the effect.
Joshua Shemesh is a Senior Lecturer at the Department of Finance in the Faculty of Business and Economics at the University of Melbourne. Josh is mostly interested in behavioral corporate finance, market efficiency and household finance. His current research focuses on how social status affects managerial decision making. Josh's research articles have been accepted for presentation at top finance conferences such as the American Finance Association (AFA) Meetings and also at specialist conferences in behavioral finance. Josh has a PhD in finance from the University of Southern California and both a BSc in Computer Science and an MBA from the Hebrew University of Jerusalem.