The Weekend Effect: A Trading Robot and Fractional Integration Analysis

22 Pages Posted: 3 Oct 2014

See all articles by Guglielmo Maria Caporale

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Luis A. Gil-Alana

University of Navarra - Department of Economics

Alex Plastun

Sumy State University

Inna Makarenko

National Bank of Ukraine - Ukrainian Academy of Banking of the National Bank of Ukraine

Multiple version iconThere are 3 versions of this paper

Date Written: May 1, 2014

Abstract

This paper provides some new empirical evidence on the weekend effect, one of the most recognized anomalies in financial markets. Two different methods are used: (i) 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; (ii) a fractional integration technique for the estimation of the (fractional) integration parameter d. The results suggest that trading strategies aimed at exploiting the weekend effect can generate extra profits but only in a minority of cases in the gold and stock markets, whist they appear to be profitable in most cases in the FOREX. Further, the lowest orders of integration are generally found on Mondays, which can be seen as additional evidence for a weekend effect.

Keywords: Efficient Market Hypothesis; weekend effect; trading strategy

JEL Classification: G12, C63

Suggested Citation

Caporale, Guglielmo Maria and Gil-Alana, Luis A. and Plastun, Alex and Makarenko, Inna, The Weekend Effect: A Trading Robot and Fractional Integration Analysis (May 1, 2014). DIW Berlin Discussion Paper No. 1386, Available at SSRN: https://ssrn.com/abstract=2504062 or http://dx.doi.org/10.2139/ssrn.2504062

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance ( email )

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HOME PAGE: http://www.brunel.ac.uk/about/acad/bbs/bbsstaff/ef_staff/guglielmocaporale/

London South Bank University ( email )

Centre for Monetary and Financial Economics
London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

Luis A. Gil-Alana

University of Navarra - Department of Economics ( email )

Campus de Arrosadia
Pamplona, 31006
Spain

Alex Plastun (Contact Author)

Sumy State University ( email )

Rymskyi-Korsakov str., 2
Sumy, 40000
Ukraine

Inna Makarenko

National Bank of Ukraine - Ukrainian Academy of Banking of the National Bank of Ukraine

57, Petropavlivska str.
Sumy, 40030
Ukraine

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