The past decade has witnessed a significant increase in the activity of foreign investors on the Tel Aviv Stock Exchange (TASE). Due to the lack of precise data, it is impossible to directly measure the volume of equity trading generated by foreign investors. We estimate, however, the scope of foreign investor activity in TASE by drawing comparisons between turnover on Sundays, a non-work day for most foreign investors, and the other days of the week. We refer to the propensity for significantly lower trading activity on Sunday as the “Sunday Effect” and attribute its growth, as revealed in our findings, in large part to the increase in foreign investor activity.
An examination of daily turnover data demonstrates that during the period 1997-2007 the differential between Sunday trade volumes and those of the other days of the week has been growing incrementally. In the past two years, Sunday turnovers have been lower on average than those of the other week days by some 24%, as opposed to 13% in 2004 and 5% in 1997.
This change can be explained by an increase in foreign investment in Israel’s capital market, which is reflected inter alia by the acquisition of shares by foreign investors. Over the past three years non-residents invested approximately four billion US dollars.
Table 1 summarizes our findings from the examination of trading data for the period 1997-2007.
Two methods were employed to conduct the comparison between Sunday volumes and those of the other days:- Comparing Sunday turnovers against those of subsequent Mondays-Thrusdays.
- Comparing Sunday turnovers against those of preceding Wednesdays-Thursdays and subsequent Mondays-Tuesdays.
As can be seen, the use of these alternative methodologies yielded no significant differences in the results.
The data does not include turnover of Index products (ETFs) and off-floor block transactions.
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