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ABSTRACT:
We study the possible impact of daylight-saving time adjustment on stock returns. Previous work reveals that average returns tend to decline following an adjustment. As averages are sensitive to outliers, more recent work focused on the entire distribution of returns and found little impact following adjustments. Unfortunately, the general nature of the alternative hypothesis reduces the power of the distribution test to detect an effect of adjustments on the location of the distribution. We construct robust tests that are designed to have power to detect a time-adjustment effect on the location of returns. We also develop a more novel test of exponential tilting that is designed to accommodate possible heterogeneity in the return distribution over time. When we apply these test to S&P 500 stock returns, we are unable to rigorously detect a time adjustment effect on stock returns.

SUGGESTED CITATION:
Douglas G. Steigerwald and Marc Conte, "Do Daylight-Saving Time Adjustments Really Impact Stock Returns?" (July 1, 2007). Department of Economics, UCSB. Departmental Working Papers. Paper 10-07.
http://repositories.cdlib.org/ucsbecon/dwp/10-07