The weekend effect: a fractional integration and trading robot analysis Online publication date: Sun, 09-Jul-2017
by Guglielmo Maria Caporale; Luis Gil-Alana; Alex Plastun; Inna Makarenko
International Journal of Bonds and Derivatives (IJBD), Vol. 3, No. 2, 2017
Abstract: This paper provides some new empirical evidence on the weekend effect, one of the most recognised anomalies in financial markets. Two different methods are used: 1) a fractional integration technique for the estimation of the degree of integration of the series (d); 2) a trading robot approach to examine whether or not there is such an anomaly giving rise to exploitable profit opportunities by replicating the actions of traders. The lowest orders of integration are generally found on Mondays, which can be seen as evidence for a weekend effect. However, the trading robot analysis shows that this anomaly cannot be exploited to make abnormal profits and, therefore, it is not inconsistent with the efficient market hypothesis (EMH).
Online publication date: Sun, 09-Jul-2017
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