Abstract
According to Chen and Singal (2003), the weekend effect arose from the action of speculative short sellers closing their risky positions on Fridays and reopening them on Mondays. Furthermore, they argue that when less risky put options became available the weekend effect disappeared for the optioned securities because the bearish investors were no longer compelled to close their short positions over the weekend. In this study we challenge both the assertion that short selling initially caused the weekend effect and the assertion that the introduction of put options dramatically altered the behavior of bearish investors. We find evidence against Chen and Singal's hypothesis in an examination of the financial press and in a survey of bearish investors. In addition, we support our position with an empirical examination of the return behavior of option securities before and after the introduction of put options and through an empirical examination of weekday volume and return before and after the introduction of put options. [PUBLICATION ABSTRACT]