RETURN AUTOCORRELATIONS AROUND NONTRADING DAYS

We document a pattern in the serial dependence of security returns aro und nontrading days. The correlation of return the second day after a weekend or holiday with returns the first day after is unusually low, and in many return series is negative, implying a reversal of price mo vements. We also document unusually large positive return autocorrelat ions the last day before and the first day after weekends and holidays . The pattern has existed in equity returns for over 100 years, and al so exists in several futures markets, implying that the pattern is rob ust to alternative market micro-structures.