futures and the Japanese Nikkei 225 Index. Journal of Economic Literature

This study examines the evolution of transitory volatility over the week for NYSE/AMEX stocks. We treat the block of ve trading days during a week as a single trading session and control for disproportionate rates of information arrival over the week by comparing variances of weekly returns measured on dierent days of the week. Our evidence, from both portfolios and individual stocks, is largely consistent with the implications of price formation models. We nd that prices on Mondays contain signicantly greater transitory volatil-ity than prices on the other days of the week. Transitory volatility declines steadily over the week. Cross-sectionally, the speed and magnitude of dissi-pation of transitory volatility are greater for larger rms. Portfolio returns exhibit a much stronger pattern, suggesting that much of transitory volatility varying in the process of price formation is not diversiable. Similar evidence is obtained from our analyses of the Dow Jones Index, the S&P 500 inde