What is it about?
This study looks at patterns in the exchange rates of eight foreign currencies against the U.S. dollar, using a viewpoint that indicates that markets adapt over time. The research uses statistical tests to see if certain seasonal effects change over time. It also checks if trading based on these patterns can earn more money than a simple buy-and-hold strategy. The findings reveal that calendar effects are present and vary over time, with stronger evidence observed in emerging market currencies compared to developed market currencies. While some trading strategies based on specific seasonal trends showed profitability, these profits were generally not statistically significant, suggesting limited reliability. Interestingly, the Turn-of-the-Month effect consistently led to statistically significant losses, indicating a reliable pattern of unprofitability.
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Why is it important?
The article enhances our understanding of how calendar anomalies influence exchange rates, how these effects change over time, and their implications for investment strategies, market efficiency, and economic policy. The study's findings are valuable for anyone interested in currency markets, from academic researchers to financial professionals and policymakers.
Perspectives
I hope this research paper proves useful to academics and practitioners alike. The findings are interesting not only from a theoretical point of view but also shedding light on long-considered potential foreign exchange investment strategies centered around well-documented calendar anomalies. Writing this paper represented a pleasure but also a personal challenge as it incorporates a new statistical methodology.
Dacio Villarreal
National Technological Institute of Mexico in Parral
Read the Original
This page is a summary of: Calendar anomalies’ adaptiveness in exchange rates: evidence from the concordance coefficient and AR-GARCH tests, Managerial Finance, August 2024, Emerald,
DOI: 10.1108/mf-06-2024-0430.
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