Day of the Week Effect on the World Exchange Rates through Fractal Analysis

Abstract

The foreign exchange rate market is one of the most liquid and efficient. In this study, we address the efficient analysis of this market by verifying the day-of-the-week effect with fractal analysis. The presence of fractality was evident in the return series of each day and when analyzing an upward trend and a downward trend. The econometric models showed that the day-of-the-week effect in the studied currencies did not align with previous studies. However, analyzing the Hurst exponent of each day revealed that there a weekday effect in the fractal dimension. Thirty main world currencies from all continents were analyzed, showing weekday effects according to their fractal behavior. These results show a form of market inefficiency, as the returns or price variations of each day for the analyzed currencies should have behaved similarly and tended towards random walks. This fractal day-of-the-week effect in world currencies allows us to generate investment strategies and to better complement or support buying and selling decisions on certain days.

Keywords

• calendar anomalies
• day-of-the-week effect
• market indices
• multifractal detrended fluctuation analysis