The term Monday effect is used to describe a historical trend, whereby the trading pattern of a financial market on the previous Friday will continue at the opening bell on Monday. The weekend effect is believed to be a result of increased investor pessimism on Saturday and Sunday.
Financial markets, such as commodities, bonds, and stocks, typically demonstrate an upward or downward trend over time. The Monday effect is a hypothesis that states the trend at the closing bell in a Friday will pick up at the opening bell on Monday.
For example, if the S&P 500 Index were rising just before the closing bell on Friday, the Monday effect would result in a continuation of that increase at the opening bell on Monday. The definition of the Monday effect is slightly different than that of the weekend effect, which states financial markets have a tendency to decline on Monday. As is the case with the weekend effect, the Monday effect has been proven empirically via a number of studies; however, the cause of this phenomenon is oftentimes debated.