The day-of-the-week-effect on the volatility of commodities

The volatilities of oil, gold, silver and the energy sector have recently become products that can be traded, and investors have begun using them for hedging and speculation. Our extensive analysis of the daily prices of these volatility products documents significant and non-random patterns of movement on Mondays and Fridays. These patterns are stable in terms of the percentage of times in which they occur and the magnitude of the returns. The results are robust using different subsamples and econometric procedures. Finally, we develop a trading rule involving investing in the differentials that results in sizeable abnormal returns. Our results have far reaching implications for the pricing of volatility products.