A calendar effect: Weekend overreaction (and subsequent reversal) in spot FX rates

Dao, Thong M.; McGroarty, Frank; Urquhart, Andrew

doi:10.1016/j.mulfin.2016.11.001

Cited by 10 publications

(3 citation statements)

References 37 publications

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“… Parikakis and Syriopoulos (2008) also study the case of the foreign exchange market and find that the Turkish lira, the Brazilian real and the US dollar overreact, while the British pound underreacts. Dao et al (2016) confirm that the overreaction hypothesis is validated for spot foreign exchange markets. Indeed, after a large price difference between Friday close and subsequent Monday open, most markets are likely to reverse in multiple horizons during the following week.…”

Section: Review Of the Literaturesupporting

confidence: 76%

Price overreactions in the commodity futures market: An intraday analysis of the Covid-19 pandemic impact

2021

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Section: Review Of the Literaturesupporting

confidence: 76%

Price overreactions in the commodity futures market: An intraday analysis of the Covid-19 pandemic impact

2021

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“…Further investigation by French (1980) showed that returns on Mondays usually are negative. After this influencing paper, hundreds of similar papers appeared searching for the dayof-the-week effect in different financial markets and assets: 19 developed stock markets all over the world (Agrawal & Tandon, 1994), emerging stock markets (Caporale et al, 2016), commodity markets (Singal and Tayal, 2014), FOREX (Dao et al, 2016) and cryptocurrency market etc. Plastun et al (2019) show that the "golden age" of day-of-the-week effect was in the 70-80-s of the XX th century and currently it has almost disappeared.…”

Section: Literature Reviewmentioning

confidence: 99%

Market anomalies and data persistence: The case of the day-of-the-week effect

Plastun¹,

Kozmenko²,

Plastun³

et al. 2019

Journal of International Studies

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This paper investigates the degree of persistence in the financial markets' data during different days of the week over the last twenty years. This allows taking a brand new look on the day-of-the-week effect and providing additional evidence against the efficient market hypothesis. The variety of the financial markets includes developed and emerging stock markets, FOREX, commodity and cryptocurrency markets. To measure the level of persistence the R/S analysis is used. The findings indicate that the level of persistence is different for different days of the week. This is inconsistent with the Efficient Market Hypothesis: data do not follow a random walk; and there can be indirect evidence in favor of the day-of-the-week effect. Conclusions on non-randomness of the data are important, because they allow choosing the best model to describe price dynamics so that to increase the predictive power of the existing models. Differences in the long-memory properties of the market data during different days of the week is an important finding that can lead to better understanding of the behavior of financial markets. High level of persistence implies data predictability, and therefore suggests that trend following technics can be applied to make profits from trading.

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“…Mamede and Fernandes (2017) identified a lower return on Mondays rather than the other days of the week associated to daily returns of 2162 Brazilian Hedge Funds that did not have redemption restrictions while Dao, McGroarty and Urquhart (2016) were able to show a weekend overreaction in spot FX rates of 7 major rates and 9 emerging currency pairs with reversals in multiple horizons during the week after large weekend gaps. The weekend affect was also found in the cryptocurrency market.…”

Section: Introductionmentioning

confidence: 99%

Weekend effect and financial characteristics: is there any relation in Latin America?

Mongrut

Delfino

2019

REMEF

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This study seeks to investigate the presence of the weekend effect in six Latin American markets (Argentina, Brazil, Chile, Colombia, Mexico and Peru) and to show the relationship between the weekend effect and investment portfolios sorted by four financial characteristics: stock market liquidity, current liquidity ratio, market capitalization (size) and price-to-book ratio. Using an extension of the French (1980) Model and a portfolio study we identify a significant weekend effect in all countries and found a negative relation between the weekend effect and four financial characteristics: the weekend effect is stronger in portfolios that contain stocks with low market liquidity, securities with low current liquidity ratios, small cap stocks (size) and stocks with low price-to-book ratios. As opposed to previous studies, we suggest that the weekend effect may be influenced by the investment of institutional investors in securitized loans issued by companies with value stocks and tight current liquidity ratios, and by the investment of individual investors in small-cap and illiquid stocks.

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A calendar effect: Weekend overreaction (and subsequent reversal) in spot FX rates

Cited by 10 publications

References 37 publications

Price overreactions in the commodity futures market: An intraday analysis of the Covid-19 pandemic impact

Price overreactions in the commodity futures market: An intraday analysis of the Covid-19 pandemic impact

Market anomalies and data persistence: The case of the day-of-the-week effect

Weekend effect and financial characteristics: is there any relation in Latin America?

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