Week of the year effect (WOY)

Week of the year effect is spotted by splitting the calendar year into 52 weeks and analyzing the return in each week.  Each week of the year is composed by 7 days, starting from the WOY n°1 that goes from January 1st to January 7th included.

Literature review

T. Levy and J. Yagil in their paper “The week-of-the-year effect: Evidence from around the globe” present 2 weeks characterized by an anomaly in return in most of world stock indices, the weeks 43 and 44.

“Using the weekly returns on the stock market indexes of 20 countries worldwide, for a period that ends in December 2010, found that the returns:

• in Week 43, which starts on October 22 and ends on October 28, are negative in 19 of the 20 countries, and statistically significant for most of the countries. The mean return across all countries (-1.34%) is far below the corresponding mean return of all other weeks (0.21%).
• in Week 44, which starts on October 29 and ends on November 4, are positive in 19 of the 20 countries, and in 18 of them, it is also statistically significant. The mean return across all 20 countries (2.27%) is more than 10 times larger than the corresponding mean for all other weeks (0.21%).

We also found that as the distance of the country from the equator increases, the significance level of both Week 43’s negative performance and Week 44’s positive performance increases (in other words, the P-value is lower). This finding seems consistent with MTO, TOW, and SAD anomalies.”

They say that results seem to be consistent with the anomalies:

• MTO: 'May to October',
• TOW: 'Turn of the Winter' and
• SAD: 'Seasonal Affective Disorder'.

About SAD disorder, a later sunset could be the cause of the improvement in mood.

So, anomalies of weeks 43 and 44 should be explained by the daylight change, which should increase seasonal disorder (SAD). But the explanation is a bit inaccurate, since:

• daylight change occurs in US every year in a slightly different timespan, between October 28th and November 6th.
• the Weeks n°43 and n°44 are measured every year in the same timespan:
  • Week 43: from Oct.22nd to Oct.28th
  • Week 44: from Oct.29th to November 4th

It may be verified if, taking the exact daylight shift date, instead of fixed dates, for Weeks n°43 and n°44, the anomalous results would be even more pronounced and so explanatory.

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