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The Day of the Week Effect in Euro and Bitcoin: Evidence from Volatility Models

Year 2022, Volume: 6 Issue: 10, 1 - 17, 31.08.2022

Abstract

In order to understand relationships between different currencies, Econometrics presents us a lot of tools. One of these tools ARCH Models are often used by many papers. On the other side, anomalies, and volatilities are the main psychological results of financial markets. This paper, it is aimed to determine some anomalies of currencies with an ARCH model as EGARCH (p, q) model with data 03.02.2014-31.12.2020 period on Bitcoin and Euro Currency. It is made in this paper clear that financial investors behave towards financial assets within anomalies and volatilities. Therefore, it is proved that the main focal point of financial epistemology should be anomalies, so volatilities also in financial innovations.

References

  • Ali, A., Hwang, L. S., & Trombley, M. A. (2003). Arbitrage risk and the book-to-market anomaly. Journal of Financial Economics, 69(2), 355-373.
  • Aharon, D. Y., & Qadan, M. (2019). Bitcoin and the day-of-the-week effect. Finance Research Letters, 31.
  • Avramov, D., Chordia, T., Jostova, G., & Philipov, A. (2013). Anomalies and financial distress. Journal of Financial Economics, 108(1), 139-159.
  • Baker, S. R., Bloom, N., Davis, S. J., & Kost, K. J. (2019). Policy news and stock market volatility (No. w25720). National Bureau of Economic Research.
  • Basdekidou, V. A. (2017). Seasoned equity offerings as technical market anomalies: long-term temporal trading functionalities. International Journal of Economics and Finance, 9(1), 96-105.
  • Baur, D. G., Cahill, D., Godfrey, K., & Liu, Z. F. (2019). Bitcoin time-of-day, day-of-week and month-of-year effects in returns and trading volume. Finance Research Letters, 31, 78-92.
  • Beck, T., Chen, T., Lin, C., & Song, F. M. (2016). Financial innovation: The bright and the dark sides. Journal of Banking & Finance, 72, 28-51.
  • Bekiros, S., Jlassi, M., Lucey, B., Naoui, K., & Uddin, G. S. (2017). Herding behavior, market sentiment and volatility: will the bubble resume?. The North American journal of economics and finance, 42, 107-131.
  • Blitz, D., & Vidojevic, M. (2017). The profitability of low-volatility. Journal of Empirical Finance, 43, 33-42.
  • Bouri, E., Shahzad, S. J. H., & Roubaud, D. (2019). Co-explosivity in the cryptocurrency market. Finance Research Letters, 29, 178-183.
  • Bouoiyour, J., & Selmi, R. (2015). What Does Bitcoin Look Like? Annals of Economics & Finance.
  • Cross, F. (1973). The Behavior of Stock Prices on Fridays and Mondays. Financial Analyst Journal , 67-69.
  • Caporale, G. M., & Plastun, A. (2020). Momentum effects in the cryptocurrency market after one-day abnormal returns. Financial Markets and Portfolio Management, 34, 251-266.
  • Caporale, G. M., & Plastun, O. (2019). Price Overreactions in the Forex and Trading Strategies. Brunel University London, Economics and Finance Working Paper Series, (19-09).
  • Chkir, I., Chourou, L., Rahman, A., & Saadi, S. (2014). Econometric Fragility of Market Anomalies: Evidence from Weekday Effect in Currency Markets. Quarterly Journal of Finance & Accounting, 75-117.
  • Çil Yavuz, N. (2015). Finansal Ekonometri. İstanbul: DER.
  • Ding, L., & Vo, M. (2012). Exchange rates and oil prices: A multivariate stochastic volatility analysis. The Quarterly Review of Economics and Finance, 15-37.
  • Dutt, T., & Humphery-Jenner, M. (2013). Stock return volatility, operating performance and stock returns: International evidence on drivers of the ‘low volatility’anomaly. Journal of Banking & Finance, 37(3), 999-1017.
  • Fama, E. F. (1965). The Behavior of Stock-Market Prices. The Journal of Business, 34-105.
  • Frankfurter, G. M., & McGoun, E. G. (2001). Anomalies in finance: What are they and what are they good for?. International review of financial analysis, 10(4), 407-429.
  • Frugier, A. (2016). Returns, volatility and investor sentiment: Evidence from European stock markets. Research in International Business and Finance, 38, 45-55.
  • Filbeck, G., Ricciardi, V., Evensky, H. R., Fan, S. Z., Holzhauer, H. M., & Spieler, A. (2017). Behavioral finance: A panel discussion. Journal of Behavioral and Experimental Finance, 15, 52-58.
  • Gaunersdorfer, A., Hommes, C. H., & Wagener, F. O. (2000). Bifurcation routes to volatility clustering.
  • Hsu, Y. T., Koedijk, K. G., Liu, H. C., & Wang, J. N. (2021). Further evidence on calendar anomalies. European Financial Management.
  • Hou, K., Xue, C., & Zhang, L. (2020). Replicating anomalies. The Review of Financial Studies, 33(5), 2019-2133.
  • Jiang, G. J., & Tian, Y. S. (2010). Misreaction or misspecification? A re-examination of volatility anomalies. Journal of Banking & Finance, 34(10), 2358-2369.
  • Jaisinghani, D. (2016). An empirical test of calendar anomalies for the Indian securities markets. South Asian Journal of Global Business Research.
  • Jaisinghani, D., Kaur, M., & Inamdar, M. M. (2019). Analyzing seasonal anomalies for Israel: evidence from pre-and post-global financial crisis. Managerial Finance. Jacob Leal, S. (2015). Fundamentalists, chartists and asset pricing anomalies. Quantitative Finance, 15(11), 1837-1850.
  • Jordan, B. D., & Riley, T. B. (2015). Volatility and mutual fund manager skill. Journal of Financial Economics, 118(2), 289-298.
  • Karan, M. B. (2005). Yatırım analizi ve portföy yönetimi. Gazi Kitabevi.
  • Kumar, S., & Pathak, R. (2016). Do the calendar anomalies still exist? Evidence from Indian currency market. Managerial Finance.
  • Kumar, S. (2018). On the disappearance of calendar anomalies: have the currency markets become efficient?. Studies in Economics and Finance.
  • Kim, K., & Song, J. W. (2020). Analyses on Volatility Clustering in Financial Time-Series Using Clustering Indices, Asymmetry, and Visibility Graph. IEEE Access, 8, 208779-208795.
  • Li, Y., & Giles, D. E. (2015). Modelling volatility spillover effects between developed stock markets and Asian emerging stock markets. International Journal of Finance & Economics, 20(2), 155-177.
  • Li, X., Sullivan, R. N., & Garcia-Feijóo, L. (2014). The limits to arbitrage and the low-volatility anomaly. Financial Analysts Journal, 70(1), 52-63.
  • Li, W., Gao, J., Li, K., & Yao, Q. (2016). Modeling multivariate volatilities via latent common factors. Journal of Business & Economic Statistics, 34(4), 564-573.
  • Lux, T., & Marchesi, M. (2000). Volatility clustering in financial markets: a microsimulation of interacting agents. International journal of theoretical and applied finance, 3(04), 675-702.
  • Ma, D., & Tanizaki, H. (2019). The day-of-the-week effect on Bitcoin return and volatility. Research in International Business and Finance, 49, 127-136.
  • Mandelbrot, B. (1963). The Variation of Certain Speculative Pces. The Journal Of Business, 394-419.
  • Nelson, D. B. (1991). Conditional Heteroskedasticity in Asset Returns: A New Approach. Econometrica, 347-370.
  • Nguyen, H. T., & Pham, M. H. (2021). Does investor attention matter for market anomalies?. Journal of Behavioral and Experimental Finance, 29, 100451.
  • Niyitegeka, O., & Tewar, D. D. (2013). Volatility clustering at the Johannesburg stock exchange: Investigation and analysis. Mediterranean Journal of Social Sciences, 4(14), 621.
  • Osborne, M. F. (1962). Periodic Structure in the Brownian Motion of Stock Prices. Operations Research, 345-379.
  • Park, H., & Sohn, W. (2013). Behavioral finance: A survey of the literature and recent development. Seoul Journal of Business, 19.
  • Papavassiliou, V. G., & Kinateder, H. (2021). Information shares and market quality before and during the European sovereign debt crisis. Journal of International Financial Markets, Institutions and Money, 72, 101334.
  • Plastun, A., Sibande, X., Gupta, R., & Wohar, M. E. (2019). Rise and fall of calendar anomalies over a century. The North American Journal of Economics and Finance, 49, 181-205.
  • Popović, S., & Đurović, A. (2014). Intraweek and intraday trade anomalies: evidence from FOREX market. Applied Economics, 46(32), 3968-3979.
  • Schwert, G. W. (2003). Anomalies and market efficiency. Handbook of the Economics of Finance, 1, 939-974.
  • Shiller, R. J. (2003). From efficient markets theory to behavioral finance. Journal of economic perspectives, 17(1), 83-104.
  • Shu, H. C., & Chang, J. H. (2015). Investor sentiment and financial market volatility. Journal of Behavioral Finance, 16(3), 206-219.
  • Singh, J. E., Babshetti, V., & Shivaprasad, H. N. (2021). Efficient Market Hypothesis to Behavioral Finance: A Review of Rationality to Irrationality. Materials Today: Proceedings.
  • Stracca, L. (2004). Behavioral finance and asset prices: Where do we stand?. Journal of economic psychology, 25(3), 373-405.
  • Weeraddana, N. R., Silva, A. T. P., & Jayathilake, P. W. D. C. (2018, September). Detection of black regions in the forex market by analyzing high-frequency intraday data. In 2018 18th International Conference on Advances in ICT for Emerging Regions (ICTer) (pp. 384-391). IEEE.
  • Woo, K. Y., Mai, C., McAleer, M., & Wong, W. K. (2020). Review on efficiency and anomalies in stock markets. Economies, 8(1), 20.
  • Yi, S., Xu, Z., & Wang, G. J. (2018). Volatility connectedness in the cryptocurrency market: Is Bitcoin a dominant cryptocurrency?. International Review of Financial Analysis, 60, 98-114.

Euro ve Bitcoin'de Haftanın Günleri Etkisi: Volatilite Modellerinden Kanıtlar

Year 2022, Volume: 6 Issue: 10, 1 - 17, 31.08.2022

Abstract

Ekonometri, farklı para birimleri arasındaki ilişkileri anlamak için bize birçok araç sunmaktadır. Bu araçlardan biri olan ARCH Ailesi Modelleri, birçok makalede sıklıkla kullanılmaktadır. Öte yandan, anomaliler, dolayısıyla oynaklıklar finansal piyasaların temel psikolojik sonuçlarıdır. Bu çalışmada, Bitcoin ve Euro Para Birimi için 03.02.2014-31.12.2020 dönemi verileri kullanılarak EGARCH (p, q) modeli ile haftanın günleri anomalilerinin belirlenmesi amaçlanmaktadır. Bitcoin için elde edilen sonuçlar neticesinde; Cuma günleri hariç hafta içi her gün Bitcoin getiri serisinde haftanın günü anomalisinin varlığı tespit edilmiştir. Euro getiri serisi için elde edilen sonuçlara göre Perşembe günleri hariç Euro getiri serisinde haftanın günü anomalisi tespit edilememiştir. Bu makalede finansal yatırımcıların, anomaliler ve oynaklıklar içinde finansal varlıklara yönelik davrandıkları açıkça belirtilmiştir. Bu nedenle finansın ana odak noktasının anomaliler olması gerektiği, dolayısıyla finansal yeniliklerde de oynaklıkların olması gerektiği kanıtlanmıştır.

References

  • Ali, A., Hwang, L. S., & Trombley, M. A. (2003). Arbitrage risk and the book-to-market anomaly. Journal of Financial Economics, 69(2), 355-373.
  • Aharon, D. Y., & Qadan, M. (2019). Bitcoin and the day-of-the-week effect. Finance Research Letters, 31.
  • Avramov, D., Chordia, T., Jostova, G., & Philipov, A. (2013). Anomalies and financial distress. Journal of Financial Economics, 108(1), 139-159.
  • Baker, S. R., Bloom, N., Davis, S. J., & Kost, K. J. (2019). Policy news and stock market volatility (No. w25720). National Bureau of Economic Research.
  • Basdekidou, V. A. (2017). Seasoned equity offerings as technical market anomalies: long-term temporal trading functionalities. International Journal of Economics and Finance, 9(1), 96-105.
  • Baur, D. G., Cahill, D., Godfrey, K., & Liu, Z. F. (2019). Bitcoin time-of-day, day-of-week and month-of-year effects in returns and trading volume. Finance Research Letters, 31, 78-92.
  • Beck, T., Chen, T., Lin, C., & Song, F. M. (2016). Financial innovation: The bright and the dark sides. Journal of Banking & Finance, 72, 28-51.
  • Bekiros, S., Jlassi, M., Lucey, B., Naoui, K., & Uddin, G. S. (2017). Herding behavior, market sentiment and volatility: will the bubble resume?. The North American journal of economics and finance, 42, 107-131.
  • Blitz, D., & Vidojevic, M. (2017). The profitability of low-volatility. Journal of Empirical Finance, 43, 33-42.
  • Bouri, E., Shahzad, S. J. H., & Roubaud, D. (2019). Co-explosivity in the cryptocurrency market. Finance Research Letters, 29, 178-183.
  • Bouoiyour, J., & Selmi, R. (2015). What Does Bitcoin Look Like? Annals of Economics & Finance.
  • Cross, F. (1973). The Behavior of Stock Prices on Fridays and Mondays. Financial Analyst Journal , 67-69.
  • Caporale, G. M., & Plastun, A. (2020). Momentum effects in the cryptocurrency market after one-day abnormal returns. Financial Markets and Portfolio Management, 34, 251-266.
  • Caporale, G. M., & Plastun, O. (2019). Price Overreactions in the Forex and Trading Strategies. Brunel University London, Economics and Finance Working Paper Series, (19-09).
  • Chkir, I., Chourou, L., Rahman, A., & Saadi, S. (2014). Econometric Fragility of Market Anomalies: Evidence from Weekday Effect in Currency Markets. Quarterly Journal of Finance & Accounting, 75-117.
  • Çil Yavuz, N. (2015). Finansal Ekonometri. İstanbul: DER.
  • Ding, L., & Vo, M. (2012). Exchange rates and oil prices: A multivariate stochastic volatility analysis. The Quarterly Review of Economics and Finance, 15-37.
  • Dutt, T., & Humphery-Jenner, M. (2013). Stock return volatility, operating performance and stock returns: International evidence on drivers of the ‘low volatility’anomaly. Journal of Banking & Finance, 37(3), 999-1017.
  • Fama, E. F. (1965). The Behavior of Stock-Market Prices. The Journal of Business, 34-105.
  • Frankfurter, G. M., & McGoun, E. G. (2001). Anomalies in finance: What are they and what are they good for?. International review of financial analysis, 10(4), 407-429.
  • Frugier, A. (2016). Returns, volatility and investor sentiment: Evidence from European stock markets. Research in International Business and Finance, 38, 45-55.
  • Filbeck, G., Ricciardi, V., Evensky, H. R., Fan, S. Z., Holzhauer, H. M., & Spieler, A. (2017). Behavioral finance: A panel discussion. Journal of Behavioral and Experimental Finance, 15, 52-58.
  • Gaunersdorfer, A., Hommes, C. H., & Wagener, F. O. (2000). Bifurcation routes to volatility clustering.
  • Hsu, Y. T., Koedijk, K. G., Liu, H. C., & Wang, J. N. (2021). Further evidence on calendar anomalies. European Financial Management.
  • Hou, K., Xue, C., & Zhang, L. (2020). Replicating anomalies. The Review of Financial Studies, 33(5), 2019-2133.
  • Jiang, G. J., & Tian, Y. S. (2010). Misreaction or misspecification? A re-examination of volatility anomalies. Journal of Banking & Finance, 34(10), 2358-2369.
  • Jaisinghani, D. (2016). An empirical test of calendar anomalies for the Indian securities markets. South Asian Journal of Global Business Research.
  • Jaisinghani, D., Kaur, M., & Inamdar, M. M. (2019). Analyzing seasonal anomalies for Israel: evidence from pre-and post-global financial crisis. Managerial Finance. Jacob Leal, S. (2015). Fundamentalists, chartists and asset pricing anomalies. Quantitative Finance, 15(11), 1837-1850.
  • Jordan, B. D., & Riley, T. B. (2015). Volatility and mutual fund manager skill. Journal of Financial Economics, 118(2), 289-298.
  • Karan, M. B. (2005). Yatırım analizi ve portföy yönetimi. Gazi Kitabevi.
  • Kumar, S., & Pathak, R. (2016). Do the calendar anomalies still exist? Evidence from Indian currency market. Managerial Finance.
  • Kumar, S. (2018). On the disappearance of calendar anomalies: have the currency markets become efficient?. Studies in Economics and Finance.
  • Kim, K., & Song, J. W. (2020). Analyses on Volatility Clustering in Financial Time-Series Using Clustering Indices, Asymmetry, and Visibility Graph. IEEE Access, 8, 208779-208795.
  • Li, Y., & Giles, D. E. (2015). Modelling volatility spillover effects between developed stock markets and Asian emerging stock markets. International Journal of Finance & Economics, 20(2), 155-177.
  • Li, X., Sullivan, R. N., & Garcia-Feijóo, L. (2014). The limits to arbitrage and the low-volatility anomaly. Financial Analysts Journal, 70(1), 52-63.
  • Li, W., Gao, J., Li, K., & Yao, Q. (2016). Modeling multivariate volatilities via latent common factors. Journal of Business & Economic Statistics, 34(4), 564-573.
  • Lux, T., & Marchesi, M. (2000). Volatility clustering in financial markets: a microsimulation of interacting agents. International journal of theoretical and applied finance, 3(04), 675-702.
  • Ma, D., & Tanizaki, H. (2019). The day-of-the-week effect on Bitcoin return and volatility. Research in International Business and Finance, 49, 127-136.
  • Mandelbrot, B. (1963). The Variation of Certain Speculative Pces. The Journal Of Business, 394-419.
  • Nelson, D. B. (1991). Conditional Heteroskedasticity in Asset Returns: A New Approach. Econometrica, 347-370.
  • Nguyen, H. T., & Pham, M. H. (2021). Does investor attention matter for market anomalies?. Journal of Behavioral and Experimental Finance, 29, 100451.
  • Niyitegeka, O., & Tewar, D. D. (2013). Volatility clustering at the Johannesburg stock exchange: Investigation and analysis. Mediterranean Journal of Social Sciences, 4(14), 621.
  • Osborne, M. F. (1962). Periodic Structure in the Brownian Motion of Stock Prices. Operations Research, 345-379.
  • Park, H., & Sohn, W. (2013). Behavioral finance: A survey of the literature and recent development. Seoul Journal of Business, 19.
  • Papavassiliou, V. G., & Kinateder, H. (2021). Information shares and market quality before and during the European sovereign debt crisis. Journal of International Financial Markets, Institutions and Money, 72, 101334.
  • Plastun, A., Sibande, X., Gupta, R., & Wohar, M. E. (2019). Rise and fall of calendar anomalies over a century. The North American Journal of Economics and Finance, 49, 181-205.
  • Popović, S., & Đurović, A. (2014). Intraweek and intraday trade anomalies: evidence from FOREX market. Applied Economics, 46(32), 3968-3979.
  • Schwert, G. W. (2003). Anomalies and market efficiency. Handbook of the Economics of Finance, 1, 939-974.
  • Shiller, R. J. (2003). From efficient markets theory to behavioral finance. Journal of economic perspectives, 17(1), 83-104.
  • Shu, H. C., & Chang, J. H. (2015). Investor sentiment and financial market volatility. Journal of Behavioral Finance, 16(3), 206-219.
  • Singh, J. E., Babshetti, V., & Shivaprasad, H. N. (2021). Efficient Market Hypothesis to Behavioral Finance: A Review of Rationality to Irrationality. Materials Today: Proceedings.
  • Stracca, L. (2004). Behavioral finance and asset prices: Where do we stand?. Journal of economic psychology, 25(3), 373-405.
  • Weeraddana, N. R., Silva, A. T. P., & Jayathilake, P. W. D. C. (2018, September). Detection of black regions in the forex market by analyzing high-frequency intraday data. In 2018 18th International Conference on Advances in ICT for Emerging Regions (ICTer) (pp. 384-391). IEEE.
  • Woo, K. Y., Mai, C., McAleer, M., & Wong, W. K. (2020). Review on efficiency and anomalies in stock markets. Economies, 8(1), 20.
  • Yi, S., Xu, Z., & Wang, G. J. (2018). Volatility connectedness in the cryptocurrency market: Is Bitcoin a dominant cryptocurrency?. International Review of Financial Analysis, 60, 98-114.
There are 55 citations in total.

Details

Primary Language English
Subjects Business Administration
Journal Section Articles
Authors

Süreyya İmre 0000-0001-8904-6635

Olcay Ölçen This is me 0000-0002-4835-1171

Early Pub Date August 29, 2022
Publication Date August 31, 2022
Submission Date March 9, 2022
Acceptance Date June 27, 2022
Published in Issue Year 2022 Volume: 6 Issue: 10

Cite

APA İmre, S., & Ölçen, O. (2022). The Day of the Week Effect in Euro and Bitcoin: Evidence from Volatility Models. International Journal of Entrepreneurship and Management Inquiries, 6(10), 1-17.

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