The impact of thin trading on day‐of‐the‐week effect: Evidence from the United Arab Emirates

Osamah M. Al‐Khazali (School of Business and Management, American University of Sharjah, Sharjah, United Arab Emirates)

Review of Accounting and Finance

ISSN: 1475-7702

Publication date: 8 August 2008



The purpose of this study is to examine the impact of thin trading on the day‐of‐the‐week effect in the emerging equity markets of the United Arab Emirates (UAE). Researchers have stated that emerging markets are typically characterized by low liquidity, thin trading and possibly less well‐informed investors with access to unreliable information and considerable volatility. It is well known that thin trading can affect the results of empirical studies on patterns of equity markets by introducing a serious bias into the results.


This study applies a stochastic dominance approach to detect the day‐of‐the‐week effect. The reason for utilizing this approach is that the parametric tests are not strictly appropriate for assets with non‐normally distributed returns. In fact, stochastic dominance is a useful tool for making comparisons among distributions without relying on parametric assumptions.


The findings indicate that there is day‐of‐the‐week effect in published daily prices, while daily effect vanishes when data are corrected to remove any measurement bias arising from thin trading. The stochastic dominance results show that the day‐of‐the‐week effect in the UAE equity markets is not present when we correct raw data for thin and infrequent trading.


There has been no research in the literature testing the day‐of‐the‐week effect on the emerging financial markets in the UAE. The study provides empirical evidence on their degree of market efficiency. If the day‐of‐the‐week effect exists, this means that the Abu Dhabi Securities Markets and the Dubai Financial Markets are inefficient. These results will help investors to develop a good investment strategy



Al‐Khazali, O.M. (2008), "The impact of thin trading on day‐of‐the‐week effect: Evidence from the United Arab Emirates", Review of Accounting and Finance, Vol. 7 No. 3, pp. 270-284.



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Copyright © 2008, Emerald Group Publishing Limited

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