Abstract: This paper investigate the day-of-the-week effect on stock return and volatility in China during the period of 2000 and 2006. Under modified GARCH framework, we find that the lowest and the highest return is present on Thursday and Tuesday for both Shanghai and Shenzhen market, respectively. The lowest volatility is observed on Tuesday for both markets, whereas the highest volatility occurs on Monday for Shenzhen and on Wednesday for Shanghai. We also find there is significantly positive relationship between expected returns and market risk. Two explanations for the day-of-the-week effect are provided in the end of the paper.

Key words: the Day-of-the-Week Effect, volatility, GARCH Model, market risk