Abstract
While many investors consider junk bonds to be part of a well-diversified portfolio, the literature defining these securities is inconclusive. In particular, the day-of-the-week effect, widely documented in other financial markets, has not yet been carefully examined in the junk bond market. Thus, to significantly extend the research on the day-of-the-week effect, this paper tests for the existence of this anomaly in the junk bond market, the investment-grade bond market, and the CRSP equity index over different business cycles. The findings of this study tend to confirm the uniqueness of the junk bond market, which differs significantly from the other markets. Also, the results suggest that the distinction by business cycle has important implications on the existence of the day-of-the-week effect.