Why Mondays Are Stormy

Monday August 31 1998

Most folks are a bit cranky on the first day of the workweek, but their Monday blues are nothing compared with those of the stock market. Last week's 512-point plunge in the Dow was just the latest jolt to Wall Street (and international markets) after the weekend--from Oct. 28, 1929, to Black Monday in 1987, to the 554-point dive last Oct. 27. Indeed, half of the 10 biggest drops in the Dow's history, both in percentage and point terms, came on Monday, which has been the worst day of the week for stocks over the past four decades. So what, other than coincidence, accounts for the infamous "Monday effect"? Several academics point to the preceding weekend, which often follows a shaky Friday. That's when individual investors--who do the majority of Monday trading--tend to ponder their investments and nervously peruse speculation in Barron's on Saturday and the big newspaper financial sections on Sunday before deciding to bail out. Other experts, like University of Chicago professor Richard Thaler, put it down to basic psychology. "People are just in bad moods on Mondays," he says. And the market, we've come to learn, is only human.

--By Daniel Eisenberg