Day of the week effect on foreign exchange market volatility: Evidence from Turkey

Abstract

This paper assesses the day of the week effect of the daily depreciation of the Turkish lira (TL) against the US dollar (USD) and its volatility. The empirical evidence from Turkey presented here suggests that Thursdays are associated with higher and Mondays with lower depreciation rates compared to those of Wednesdays. Moreover, Mondays and Tuesdays are associated with higher volatility than Wednesdays.

Seasonal processes in the Euro–US Dollar daily exchange rate

“…Baillie and Bollerslev (1989, specifically p. 63) relate the evidence of higher variance on Monday (regarding a set of bilateral exchange rates) to the fact that information flow after two vacation days is particularly relevant, and this leads to higher variability. Some investigations relate the day effect in exchange rates also to the dynamics in stock markets: see Foster and Vishwanathan (1990), and the discussion in Berument et al (2007). In particular, increased volatility around weekends and vacation days in financial markets was found by several studies in the 1980s, see e.g., Keim and Strambaugh (1984) and French and Roll (1986).…”

Day-of-the-week effect in the Nigerian Stock Market Returns and Volatility: Does the Distributional Assumptions Influence Disappearance?

“…If γ = 0, then a positive (ε t−1 /h t−1 > 0) has the same magnitude effect as a negative surprise. However, if −1 < γ < 0, a positive surprise increases volatility less than a negative surprise does, but if γ < −1, then a positive surprise decreases volatility while a negative surprise increases volatility (Berument et al, (2007)). The standard error coefficients were estimated by the Broyden, Fletcher, Goldfarb, Shanno (BFGS) iteration optimization.…”

The day-of-the-week effects on the volatility: The role of the asymmetry

“…The authors show that the day-of-the-week effect is present on the SP 500 index in both the volatility and return equations. Berument et al (2007) assess the day-of-the-week effect on foreign exchange rate changes and their volatility with an EGARCH specification. More recently, Alagidede (2008) investigates the dayof-the-week anomaly in Africa's largest stock markets by looking at both the first and second moments of returns.…”