The Impact of Government Weekend Policy Changes and Foreign Institutional Holdings On Weekly Effect of Tourism Stock Performance

Abstract

Since the Taiwanese government implemented a 2-day weekend policy, traveling activities have become increasingly popular, and foreign institutional holdings (FIHs) on stocks of tourism firms have soared. This study investigates the influence of the weekend policy changes and increasing FIHs on the weekly effect of tourism stock returns over the period between 1994 and 2004. First, this study tests whether there is any weekly effect of tourism stock returns and whether weekly effects, if any, persist or diminish after the weekend policy changes. It is found that a significantly negative Tuesday effect on tourism stock returns existed. Second, the impact of the increasing FIHs on the negative Tuesday effect is examined. The increasing FIHs on tourism stocks not only weaken the negative Tuesday effect, but also decrease the risk of negative Tuesday returns. Policy implications based on the main findings are provided to guide tourism business managers, policy makers and investors.