Weekday Effect, Autocorrelation and Price Limit in the Taiwan Stock Market--The Application of Gibbs Sampler Method

Abstract

We reexamine the weekday effect by taking into account the potential impacts of price limits. The imposition of price limits causes the observed stock returns to be truncated, thereby the traditional estimation methods based on the distorted observed returns are biased. We adopt a Gibbs Sampler approach proposed by Chou (1997). The empirical results show that there are no significant weekday effects, though the returns on Tuesday, Wednesday and Thursday are lower.