Uncertainty Structure Hypothesis - Seasonal Patterns in Uncertain Times at the Stock Market?

The examination of the day-of-the-week effect has been a subject of financial research for over five decades. However, findings regarding different returns on specific weekdays have remained inconclusive. We aim to address this inconsistency by extending existing theories through the incorporation of the "Uncertainty Structure Hypothesis". Our hypothesis states that uncertainty plays a pivotal role in shaping the weekly pattern of day-of-the-week effect. A meta-analysis is conducted to explain heterogeneity of primary study results and to identify uncertainty as an underlying factor. We include 85 primary studies from 61 countries in our analysis.The findings reveal that the day-of-the-week effect experiences a partial dissipation when incorporating uncertainty indices, such as the EPU, WUI, or VIX. Specifically, the popular “Friday Effect” diminishes, leaving only a weaker average return for Mondays and Tuesdays. The impact of uncertainty on the day-of-the-week effect varies depending on the measure used. Nevertheless, the results strongly suggest that uncertainty has a significant impact on the weekly patterns observed in investor behavior