Calendar Anomalies in the foreign exchange market

An analysis of multiple calendar anomalies in the Australian foreign exchange market

Robert Zandbergen

1983504

Vrije Universiteit Amsterdam

Department: Finance

Supervisor: Prof. dr. P.A. Stork

Abstract
This research investigates the daily returns on foreign exchange rates between the Australian Dollar and
eight other currencies. The timeframe used for this research is from 1990 until 2010. The calendar
effects investigated are the Day of the Week effect, January effect, Turn of the Month effect, Holiday
effect and the End of the Year effect. Distinct results are found for the End of the Year effect. Little
evidence is found for the other calendar effects. This research and the results found are more up-to-
date than prior research because the data used for this research is more recent than data used by other
researchers. This research therefore complements prior research.
Master thesis Robert Zandbergen

Table of contents

1 Introduction .................................................................................................................................... 4
2 Calendar effects .............................................................................................................................. 6
2.1 Day-of-the-week effect ............................................................................................................ 6
2.2 January effect .......................................................................................................................... 7
2.3 Turn-of-the-month effect ......................................................................................................... 7
2.4 Holiday effect ........................................................................................................................... 8
2.5 End-of-the-year effect .............................................................................................................. 8
2.6 Summary of theory .................................................................................................................. 9
3 Data............................................................................................................................................... 10
3.1 Day of the week effect ........................................................................................................... 11
3.2 January Effect ........................................................................................................................ 12
3.3 Turn of the Month effect ........................................................................................................ 12
3.4 Holiday Effect ......................................................................................................................... 13
3.5 End of the year effect ............................................................................................................. 13
4 Research method........................................................................................................................... 15
4.1 Hypotheses ............................................................................................................................ 15
4.1.1 Day of the Week effect ................................................................................................... 15
4.1.2 January effect ................................................................................................................. 15
4.1.3 Turn of the Month effect ................................................................................................ 15
4.1.4 Holiday effect ................................................................................................................. 16
4.1.5 End of the Year effect ..................................................................................................... 16
5 Empirical results ............................................................................................................................ 17
5.1 Model tested.......................................................................................................................... 17
5.1.1 Day of the Week effect ................................................................................................... 17
5.1.2 January effect ................................................................................................................. 17
5.1.3 Turn of the Month effect ................................................................................................ 18
5.1.4 Holiday effect........................................................................................................................ 18

2
Master thesis Robert Zandbergen

5.1.5 End of the year effect ............................................................................................................ 18

5.2 Results of analyses ................................................................................................................. 18
5.2.1 Day of the Week effect ................................................................................................... 20
5.2.2 January effect ................................................................................................................. 20
5.2.3 Turn of the Month effect ................................................................................................ 21
5.2.4 Holiday effect ................................................................................................................. 23
5.2.5 End of the Year effect ..................................................................................................... 25
6 Conclusions and discussion ............................................................................................................ 27
7 References..................................................................................................................................... 29
Appendix A ............................................................................................................................................ 31
Test of normality ............................................................................................................................... 31

3
Master thesis Robert Zandbergen

1 Introduction
Academics have conducted a lot of research on so-called calendar effects. These are anomalies in the
returns of for example stocks, stock indices or foreign exchange rates. Academics have looked into the
existence of calendar effects from two angles. On the one hand research has been conducted to
calendar effects in the stock market returns. For example Agrawal and Tandon (1994) conducted
research to the weekend, turn-of-the-month (TOM), end-of-December (end-of-the-year), monthly and
Friday the thirteenth effect in stock returns. Kunkel, Compton and Beyer (2003) conducted research to
the TOM effect in stock market returns. Holden, Thompson and Ruangrit (2005) also contributed to the
literature on this topic by conducting research to the existence of calendar effects in the Thai Stock
Market.

On the other hand the calendar effects in the foreign exchange markets have been examined. For
example Aydoğan and Booth (2003) conducted research to the day-of-the-week (DotW) effect and the
TOM effect in the Turkish foreign exchange market. They looked into calendar anomalies within the
exchange rates of the US Dollar, Deutsche Mark and the Turkish Lira. Yamori and Mourdoukoutas (2003)
did similar research to the calendar effects in the Yen/US Dollar market. Yamori and Kurihara (2004) and
Ke, Chiang and Liao (2007) also contributed to the literature of calendar effects within the foreign
exchange markets.

The general tendency is that, within the stock markets the calendar effects disappeared during the
1990s. A probable cause for this may lie in the liberalization of the stock markets leading to more
efficiency (Hansen, Lunde, and Nason (2005), Haug and Hirschey (2006)). However, within the foreign
exchange market results differ. For example Yamori and Kurihara (2004) find that the DotW effect
disappears for all currencies during the 1990s. This research focused on the European countries and the
United States. This evidence is supported by findings of Yamori and Mourdoukoutas (2003). Research
conducted to the Taiwan foreign exchange market by Ke, Chiang and Liao (2007) provides evidence that
within less developed parts of the world, calendar effects existed in more recent years.

Within this paper, the research is focused on calendar effects in the foreign exchange market. The main
question to be answered is:

Do calendar effects still exist in the foreign exchange markets?

This research aims to provide an overview of the previous research performed. In addition, a dataset
which has to my knowledge not been used before for this type of research, is used for analysis. In order
to answer the main question, sub questions regarding individual calendar effects are answered based
upon analysis of the data. The analysis covers the period 1990-2010 and is divided into two sub-periods.
This timeframe is a more recent timeframe than these used by Aydoğan and Booth (2003), Yamori and
Kurihara (2004) and Ke, Chiang and Liao (2007). The calendar effects for which this data set is tested are
the DotW, TOM, Holiday (HOL), January and the end-of the year (EotY) effect. In this research eight
exchange rates are taken into account relative to the Australian Dollar. Among these rates there are
Western countries as well as Asian countries.

4
Master thesis Robert Zandbergen

The remainder of the paper is structured as follows. First the theory on the subject of calendar effects is
introduced. Next the hypotheses as well as model tested are presented. This is followed by a detailed
description about the research methods. Finally, the results, conclusions and suggestions of this
research are provided.

5
Master thesis Robert Zandbergen

2 Calendar effects
Before presenting the theory based upon previous research, a clear definition of a “calendar effect”
should be provided. Based upon previous research, the definition which covers the meaning of calendar
effects is a significant difference in return on a particular day, time of the month or period of the year
relative to the return achieved during the rest of the year. So a calendar effect can be considered an
anomaly, since the return deviates from the return one would expect based upon the average return
throughout the year. Due to the fact that much research has been done to this topic related to stock
returns, these findings are used as well to form a thorough understanding about the different calendar
effects.

2.1 Day-of-the-week effect

The DotW effect refers to a significantly different return on a particular day during the week compared
to the return on during the other days of the week. For example Jaffe et. al (1985) find that the lowest
mean returns on Australian and Japanese stocks are achieved on Tuesdays. This result is not explained
by offsetting changes in the foreign exchange market. The study of Lakonishok and Smidt (1988) used a
dataset of 90 years of daily data. Lakonishok and Smidt finds that stock returns from the Dow Jones
Industrial Average are substantially negative on Mondays. This return differs significantly from returns
during other days of the week.

Wang, Li and Erickson (1997) find that the Monday effect mainly occurs during the fourth and fifth week
of the month. For the first three Mondays of the month stock returns that are found do not significantly
differ from zero. Wang, Li and Erickson also find that when dividing the month in two halves the
difference in return for the first half and the second half of the month does not significantly differ from
zero. This is the result when the returns of Mondays are excluded. This is an indication that the returns
on Monday have significant impact on the total return during a month.

Aydoğan and Booth (2003) find evidence for the day-of-the-week effect in the foreign exchange market.
The returns on Tuesdays and Wednesdays are significantly higher than on the other days of the week. In
addition, Yamori and Mourdoukoutas (2003) conducted research to the DotW effect in the Yen/Dollar
market. Evidence for this effect is found for the period 1973-1989. During the following years the DotW
effect has been vanished. An explanation for this could be that the foreign exchange market in Japan has
been liberalized during the 1990s. This may have lead to more efficiency in the Yen/Dollar market,
leading to disappearance of the day-of-the-week effect. Similar evidence is found by Yamori and
Kurihara (2004). They conclude from their study that for European currencies the DotW existed during
the 1980s. It should be noted that the research has been done to the currencies which were traded in
New York. During the 1990s this effect disappears. For the US dollar this effect could not be found in
either part of the timeframe. This implies that Europe specific factors have been the cause for this
effect. The results found are similar to the results found by research conducted to calendar anomalies in
stock market returns.

The study of Ke, Chiang and Liao (2007) finds that returns on Taiwan foreign exchange markets appear
to be significantly higher during the first three days of the week than on the other two days of the week.
6
Master thesis Robert Zandbergen

This effect also holds during the most recent years taken into account in the sample (1992-2006) which
differs from the studies mentioned before. The DotW effect was found for the Canadian Dollar (CAD),
Hong Kong Dollar (HKD), Japanese Yen (JPY), Swiss Franc (CHF) and the United States Dollar (USD).
Research conducted to the Turkish Lira against the US Dollar by Berument, Coskun and Sahin (2007)
finds that depreciation of the Lira on Thursdays is highest and on Monday lowest. The volatility of the
exchange rate is highest on the first two days of the week.

There are no unanimous results when looking at prior studies. However, in general the mean returns
tend to be more extreme during the Mondays and Tuesdays whereas returns during the last three days
of the week tend to be less extreme. The effect becomes weaker or even disappears during the 1990s.

2.2 January effect

The January effect refers to a significantly different return compared to the return during the other
months of a year. The first to report this effect has been Wachtel (1942). This shows that the January
effect is an effect which fascinates academic researchers for a long time already.

During the month January, stocks of large firms show a significantly higher returns in 14 countries (out
of 18 countries) compared to the return during the rest of the year. The countries were no evidence was
found (Canada, New Zealand, Australia and Hong Kong) are countries with a tax year that does not count
from January till December, which might be an explanation for the January effect to be absent (Agrawal
and Tandon (1994)). Rather than previous research Chen and Chan (1997) did not solely focus on stocks
but they also took into account bonds and bill returns. They found evidence for the existence of the
January effect. However, for stocks of small firms the January effect is stronger when the economy is
growing. During economic contraction the January effect is less significant along the line (all types of
financial products).

According to Haug and Hirschey (2006) the January effect within the US Stock Markets still exists.
However, the effect is a small cap phenomenon rather than a phenomenon which applies to all the US
Stock Markets. Whether the January effect is still as strong as it used to be remains to be seen. Due to
worse performance than the anomaly suggests the January effect has weakened over time (Swinkels
and Van Vliet (2011)).

2.3 Turn-of-the-month effect

The TOM effect refers to the point where one month ends and another starts. When returns around this
point of TOM differ significantly from the average return of the month one can say that there is a TOM
effect.

Lakonishok and Smidt (1988) shows that the stock return around the end of the month is significantly
higher than on other trading days during the month. These findings are supported by Agrawal and
Tandon (1994) who found evidence for 14 out of the 18 countries for a significantly higher return during
the last days of the month compared to the other days of the month.

7
Master thesis Robert Zandbergen

Aydoğan and Booth (2003) present a different result for the foreign exchange market. Returns on
exchange rates have the tendency to be significantly lower in the last week of the month. The returns in
the first five days of the next month are significantly higher. It should however be noted that the Turkish
Lira is measured relative to currencies of more developed countries. This influenced the outcome of the
research.

Research conducted by Kunkel, Compton and Beyer (2003) finds evidence that the TOM effect exists in
the stock markets during the period 1988-2000. For 16 countries out of the total sample of 19 countries
evidence for the TOM effect was found. During the period 1994-2000 the TOM was not found to be
present in the US stock markets. However, for countries like Japan and Canada evidence was found that
TOM was present during the entire period.

2.4 Holiday effect

The HOL effect refers to a significantly different return on the first or last trading day after/before a
national holiday compared to trading days during the rest of a period. When performing statistical
analyses for this effect a distinction can be made between pre-holiday and post-holiday.

Lakonishok and Smidt (1988) found that stock returns on the day prior to a holiday are higher than the
returns during other days. Pettengill (1989), Ariel (1990) and Vergin and McGinnis (1999) found that the
stock returns before a holiday tend to be higher as well as that the returns after a holiday tend to be
lower. Aydoğan and Booth (2003) found evidence for a pre-holiday effect for their sample in the Turkish
foreign exchange market. Prior to a holiday the changes in the exchange rates are lower than during
other trading days. Research conducted to the holiday effect in the Thai stock market (Holden,
Thompson and Ruangrit (2005)) shows that the returns prior to a holiday do not significantly differ from
returns during other trading days.

Holden, Thompson and Ruangrit (2005) found that during periods following a crisis the pre-holiday and
post-holiday effect are significantly different compared to the mean return of all trading days. However,
during other periods of the economic cycle these effects are positive but not significant. The research of
Swinkels and Van Vliet (2011) provides evidence that the holiday effect can only be significant when it
occurs with the TOM effect or the Halloween effect.

As one can see prior literature suggests that returns are higher on the last trading day prior to holidays
and lower on the first trading day after holidays. However, the results for the foreign exchange market
seem to differ from the results for stock markets.

2.5 End-of-the-year effect

The EotY effect refers to a significantly different return during the last trading days of the year compared
to the other trading days during the year. Lakonishok and Smidt (1988) divide the EotY in three different
types:
1) Pre-Christmas (December 15–23)
2) Between Christmas and New Year (December 27-30)
3) Pre-Christmas and New Year (December 24 and 31)

8
Master thesis Robert Zandbergen

Based upon this research stock returns tend to increase on average with 1.5 per cent during the period
starting with the last trading day before Christmas till the end of the year. Prior to Christmas returns in
11 countries (from a total of 18) are significantly higher than the average return over the year. Returns
between Christmas and the end-of-the-year are significantly higher in 14 out of 18 countries. It should
however be noted that these results are to a certain extent influenced by portfolio managers who adjust
their portfolio prior to year ending (Agrawal and Tandon (1994)).

In the paper of Hansen, Lunde, and Nason (2005) evidence is presented which shows that the end-of-
the-year effect is predominant to the other calendar effects. Furthermore evidence is found that at the
end of the year the stock returns are significantly different from returns during the rest of the year. This
research also provides evidence that during the 1980s these effects exist, but that from the early 1990s
these effects disappear.

2.6 Summary of theory

The theory mentioned in this section provides a clear picture of what has happened through time to
calendar effects that are subject of this research (DotW, January effect, TOM, HOL effect and EotY
effect). Even though literature regarding calendar anomalies in stock markets as well as in foreign
exchange markets have been included the following trends are observed.

Some calendar anomalies have become weaker over time or even disappeared in research which
included data from the 1990s (DotW and EotY). This might be the result of markets becoming more
efficient over time. Nevertheless this does not hold for all calendar effects included in this study. More
recent studies provide evidence for the existence of calendar effects such as the January effect, TOM
effect and the HOL effect.

In the following section the data used to conduct research to all five calendar effects mentioned in this
section will be introduced.

9
Master thesis Robert Zandbergen

3 Data
The data used for this research covers the timeframe from January 1, 1990 until December 31, 2010.
Within this timeframe there has been 5,295 trading days. This period has been split into two sub-
periods: 1990-1998 and 1999-2010. This was done to look at the developments of calendar effects
through time. As of January 1, 1999 the Euro got in place as currency for 15 European countries. Since
this might have influence on exchange rates throughout the world, the second sub-period starts January
1, 1999.

The data has been acquired through the Reserve Bank of Australia. The exchange rates used are the
exchange rates registered at 4.00 PM Australian Eastern Day Time for all exchange rates. This
guarantees the quality of this research, since differences in time zones could influence exchange rates
when particular news comes out. By taking the exchange rates at one particular moment of the day,
such influences can be eliminated thereby supporting the robustness of the data and the analysis.

Furthermore, prior research suggests that the foreign exchange market in Europe and the United States
are more efficient than those of other countries. This research focuses on the exchange rates between
the Australian dollar and currencies of more developed countries in the both in Asia and Oceania as well
as some Western countries. As a result a difference could come to the surface between Asia and
Oceania on the one hand and the Western countries on the other hand. This has also been of influence
for the decision for using data from the Reserve Bank of Australia. The data used is the foreign exchange
rate against the Australian Dollar (AUD).

The countries included in this research are the United States of America (USD), Japan (JPY), Great Britain
(GBP), Canada (CAD), Switzerland (CHF), New Zealand (NZD), Hong Kong (HKD) and Singapore (SGD). The
reason for selecting these countries lies in the fact that some of them are very big countries of which a
lot of information is available. Therefore it is less likely to find calendar effects in these exchange rates.
This includes the United States of America, Japan, Great Britain and Canada. The other countries in this
research are included since their currencies are used in similar researches on calendar effects. Since this
includes smaller countries, one could expect that the chance on finding calendar effects in these
exchange rates may be higher than in the exchange rates of bigger countries. The so-called smaller
countries are Switzerland, New Zealand, Hong Kong and Singapore. Table 1 shows the frequency table of
the data used for this research.

10
Master thesis Robert Zandbergen

Table 1 – Frequency table of the data

Analysis in this research is performed to test for the following calendar effects:
1. Day of the week effect
2. January effect
3. Turn of the month effect
4. Holiday effect
5. End of the year effect

3.1 Day of the week effect

This effect suggests that there are particular days of the week where the return in exchange rates are
significant different from zero as well as where particular days have significantly different returns than
other days of the week. In the dataset dummies were used for all workdays of the week (Monday till
Friday) taking “1” if it is a Monday and “0” if it is another day. The same method has been used for the
other days of the week. All dummies were included into one model in order to see what influence
whether a particular day has a significant influence on the return. The constant has been excluded to
prevent that a dummy-trap occurs thereby influencing the outcomes of the analysis. In total there has
been 5,295 trading days in the period 1990-2010.

11
Master thesis Robert Zandbergen

The distribution of days throughout the entire sample period is as follows:

 Monday: 1,000 (18.89%)

 Tuesday: 1,075 (20.30%)
 Wednesday: 1,081 (20.42%)
 Thursday: 1,082 (20.43%)
 Friday: 1,057 (19.96%)

In Table 2 the distribution of trading days over the days of the week are shown. A distinction is made
between the two sub-periods (1990-1998 and 1999-2010).

Table 2: Distribution of trading days (DotW)

3.2 January Effect

Testing for the January effect is aimed to find evidence that during the month January the returns are
significantly different from zero as well as the returns are significantly different from the returns during
the rest of the period. A dummy is used which takes value “1” if it is a trading day during the month
January and “0” during trading days in other months. This effect is found for 427 trading days (8.06%). In
order to perform a Wald-test an extra dummy has been included which is the opposite of the dummy
for January. As such, this dummy takes value “1” for each trading day in other months than January and
“0” if a trading day is a day during the month January.

3.3 Turn of the Month effect

A dummy is used to test whether the last trading day of the month until the fourth trading day of the
new month result in significantly different returns than zero as well as significantly different returns
compared to the mean return for the entire period. This dummy takes value “1” if the trading day is the
last of a particular month or if it is the first until the fourth trading day of the month following that
particular month. This effect is found on 1,260 trading days (23.80%). Another dummy has been
included which takes value “1” for each trading day. As such the researcher is able to test whether the
returns during the trading days related to the TOM are significantly different from the mean return
during the period.

12
Master thesis Robert Zandbergen

3.4 Holiday Effect

The effect of Australian holidays is tested since the data used reflects the Australian foreign exchange
market rates. As a consequence more impact could be expected from these holidays rather than from
foreign holidays. A dummy is used to test whether the last trading day prior to a holiday in Australia
results in a significantly higher return than the return for the entire period. Therefore the dummy is
called “pre-holiday” and takes value “1” if it is the day prior to a holiday or “0” otherwise. To eliminate
the possibility that the first trading day after a holiday performs significantly different (either better or
worse) than other days a post-holiday dummy has been used. This dummy takes value “1” the first
trading day after a holiday in Australia and value “0” otherwise. Both the Pre-holiday and the Post-
holiday effect are found on 128 trading days (2.42%). The additional dummy, as stated under the TOM
effect has been used to investigate whether the returns on the last day prior to, or first day after a
holiday are significantly different from the returns during the entire period.

The holidays in Australia that are taken into account are:

 New Year’s Day – 1st January
 Australia Day - 26th January
 Anzac Day - 25th April
 New Year’s Day - 1st January
 Good Friday
 Easter Monday
 Christmas Day - 25th December
 Boxing Day - 26th December
 Public Bank Holiday - First Monday of August (as of 1999)
 Labour Day - First Monday of October (as of 1999)

The Public Bank Holiday as well as the Labour Day are bound to the New South Wales district in
Australia. This is the district which includes Sydney, which is the city where the Reserve bank of Australia
is located. This bank is officially closed during these holidays which came into force as of 1999.

3.5 End of the year effect

A dummy is used to find evidence whether returns at the end of the year are significantly higher than
during the rest of the year. There are three dummies used.
 End of the Year (pre-Christmas) hereafter: EotY (1), these are the trading days from
December 15 till the day before the last day to Christmas. This effect is found on 129 trading
days (2.44%).
 End of the Year (between Christmas and New Year’s Day) hereafter: EotY (2), thereby
excluding the last trading day of the year. This effect is found on 40 trading days (0.76%).
 End of the Year (pre-Christmas and Pre-New Year’s Day) hereafter: EotY (3), taking the last
trading day before Christmas and the last trading day before New Year’s Day. This effect is
found on 42 trading days (0.79%).

The total of trading days that qualify as EotY day is found on 213 trading days (4.02%). For the overview
this has been named EotY (4) in Table 3.
13
Master thesis Robert Zandbergen

For each day that fits the description for a particular dummy of the End of the Year effect (EotY) the
dummy takes value “1”. If the trading day does not fit the requirements the dummy takes value “0”. The
dummy which takes value “1” for each trading day is also included in this analyses in order to find
whether the returns during the EotY differs significantly from the returns during the entire period.
Table 3 presents the distribution of days throughout the sample for the calendar effects next to the
DotW effect which have been presented in Table 2.

Table 3 – Distribution of other calendar effects

14
Master thesis Robert Zandbergen

4 Research method
In this research data is tested for the existence of calendar effects. This is done by making use of the
Ordinary Least Squares (OLS) regression thereby performing a White-test to make the results robust
against heteroscedasticity as well as making use of the Wald-test. This Wald-test is similar to an F-test
since the data is assumed to be normally distributed (based upon the Central Limit Theorem). For each
calendar effect an OLS regression was run to see whether returns on particular days differ significantly
from zero. The constants of the model have been excluded from the regression to prevent the outcomes
to be biased by the dummy-trap. The Wald-test was run to see whether the differences in return per
calendar effect differ significantly from the returns during days without a particular calendar effect.

4.1 Hypotheses
The hypotheses tested are based upon the calendar effects which were introduced in the ‘Data’ section.

4.1.1 Day of the Week effect

The first hypothesis is related to the DotW. Based upon prior research, the trend has been that over
time calendar effects disappear (Yamori and Mourdoukoutas (2003) and Yamori and Kurihara (2004)).
These studies included more Western currencies which are used in this research as well. However, in
studies which included less Western currencies the DotW effect is still found in more recent years (Ke,
Chiang and Liao (2007)). Based upon these findings, the expectation is that the DotW effect will not be
found in the sample used for this research since the countries included are all rather developed
countries. As a consequence the hypothesis for the DotW is as follows:

H1a: The return on a particular day of the week does not significantly differ from other days in that
particular week.

H1b: The return on a particular day of the week does not significantly differ from zero.

4.1.2 January effect

Prior research suggests that the less efficient a market is, the stronger the January effect tends to be
(Chen and Chan (1997) and Haug and Hirschey (2006)). Since Australia can be considered a Western
country, the money market is rather efficient. As a consequence no evidence is expected to be found for
the January effect. The hypothesis is as follows:

H2a: The return in January does not significantly differ from returns during the rest of the year.

H2b: The return during the month January/other months does not significantly differ from zero.

4.1.3 Turn of the Month effect

The TOM effect is found to be present in more recent years (Kunkel, Compton and Beyer (2003)).
Research of Lakonishok and Smidt (1988) and Agrawal and Tandon (1994) shows that the stock returns
15
Master thesis Robert Zandbergen

during the last days of the month are significantly higher than during the rest of the month. Within
exchange rates, returns tend to be lower during the last week relative to the other weeks of the month
(Aydoğan and Booth (2003)). It should however be noted that a currency of a less developed country is
measured relative to currencies of more developed countries. As a consequence the hypothesis is as
follows:

H3a: The return during the TOM significantly differs from returns during the rest of the months.

H3b: The return during the TOM/whole period significantly differs from zero.

4.1.4 Holiday effect

Evidence for the HOL effect is found in many studies. Some studies found evidence that the last trading
day before a holiday shows significantly higher returns than on other days (Lakonishok and Smidt
(1988)). In addition returns on the first trading day after the holiday are significantly lower than on other
days during the year (Pettengill (1989), Ariel (1990) and Vergin and McGinnis (1999)). Within the
exchange markets the return on the last trading day prior to a holiday is significantly lower than during
other days of the year Aydoğan and Booth (2003). As a consequence both, the last trading day prior to a
holiday as well as the first trading day after a holiday are tested. The hypotheses for the HOL effects are
as follows:

H4a: The returns on the HOL days do not significantly differ from the returns during the whole period.

H4b: The returns during the HOL days do not significantly differ from zero.

4.1.5 End of the Year effect

The fourth hypothesis is about the EotY effect. Lakonishok and Smidt (1988) found evidence that the
returns at the EotY significantly differs from returns during the rest of the year. This evidence is
supported by Hansen, Lunde, and Nason (2005). However, the effect disappears during the 1990s
relative to the 1980s. Therefore it is expected that no evidence is found for the EotY. In this research the
EotY is divided into three sub effects. The hypotheses are therefore as follows:

H5a: The return during the EotY does not differ significantly from returns during the whole period.

H5b: The return during the EotY does not differ significantly from zero.

16
Master thesis Robert Zandbergen

5 Empirical results
Before elaborating on the empirical outcomes of this research the normality of the data was tested. First
a Kolmogorov-Smirnoff test has been performed. Secondly a check for the skewness and kurtosis was
performed. Dividing the skewness/kurtosis by its own standard deviation should result in a Z-value. This
Z-value should be within a range of plus and minus 1.96 in order to be normally distributed. As the
results of these tests show, the data is not normally distributed (see Appendix A). Since the minimum
amount of observations is 42 (for the EotY 1 and 2) the assumption for the Central Limit Theorem (CLT)
holds. Therefore the data can be treated as if it actually is normally distributed.

Furthermore normal probability plots as well as histograms of the standardized residuals have been
created to check for heteroscedasticity. Evidence is found for heteroscedasticity which indicates that the
variances of the error term are not independent from the dependent variable (return). As a result a
White test is performed in order to correct the standard errors for heteroscedasticity, making the
analyses more robust. Additionally no evidence is found for autocorrelation. The OLS regressions as well
as the Wald-tests are performed on this more robust data, making the analyses and the outcomes more
reliable.

5.1 Model tested

The OLS regression analyses are performed on each calendar effect. The models used are presented
below.

5.1.1 Day of the Week effect

For the DotW effect the following equation has been used:

Returnt = α1Mondayt + α 2Tuesdayt+ α 3Wednesdayt+ α 4Thursdayt+ α 5Fridayt + εt (1)

5.1.2 January effect

The models for the January effect looks as follows:

Returnt = α1Januaryt + α2 Other monthst + εt (2)

The dummy “Other months” has been added to see whether other months than January do have a
significantly different return from zero. Since this dummy is included in the regression, the constant
should be kept out to prevent the dummy-trap for influencing the robustness of the analyses.

17
Master thesis Robert Zandbergen

5.1.3 Turn of the Month effect

The model tested for the TOM looks as follows:

Returnt = α1TOMt + α2 Whole periodt + εt (3)

The dummy ‘whole period’ has been added to see whether the returns during the whole period are
actually significantly different from zero in this model.

5.1.4 Holiday effect

The model tested for the HOL effect looks as follows

Returnt = α1PreHOLt + α2 PostHolt + α3 Whole periodt + εt (4)

Since more than one dummy is included as independent variable, the constant is excluded from the
regression. The dummy ‘whole period’ has been included in this model to see whether the returns
during the whole period actually differ from zero.

5.1.5 End of the year effect

The model tested for the EotY includes three dummies from EotY, namely EotY (1), (2) and (3). The
model looks as follows:

Returnt = α1EotY(1)t + α2 EotY(2)t + α3 EotY (3)t + α1Whole periodt + εt (5)

The dummy whole period is added to the equation to see whether the return during the whole period
significantly differs from zero.

5.2 Results of analyses

The results for the OLS regression as well as for the Wald-test regarding the different calendar effects
are presented in the following sub-sections.

18
Master thesis Robert Zandbergen

Table 4 – Coefficients OLS Regression – Day of the week (Note: The returns mentioned under the different days per week are the
coefficients as acquired through the OLS regression. Numbers in the parentheses are the standard errors which are
heteroscedasticity consistent due to the White-test. The column “Wald” refers to the Wald-test performed indicating whether
the returns during the week are significantly different on a particular day of the week compared to the other days of the week)

19
Master thesis Robert Zandbergen

5.2.1 Day of the Week effect

Looking at the F-value from the Wald-test it can be concluded that the returns on a particular day of the
week do not significantly differ from returns on other days of the week. This supports the results of
Yamori and Mourdoukoutas (2003) who conclude from their research that the DotW effect. The findings
of this research also support the conclusions of Fama (1998) who concluded that long-term anomalies in
stock markets tend to vanish through time.

However, that the returns on a particular trading day are not significantly different from each other does
not mean that returns on a particular day cannot be higher than returns on a particular day. The F-value
only indicates that, taking all the days of the week into account, during these days there is not one
particular day that has a significantly different return from the other days of the week.

When looking at individual days, the numbers presented are the coefficients acquired through the OLS
regression. For the DotW effect the GBP has a significantly lower (than zero) return on Tuesdays at a 10
per cent level (1990-1998) and a significantly higher return at a Mondays (5 per cent level) during the
sub-period 1999-2010. For the CAD a significantly (at a 10 per cent level) higher return is found during
the period 1999-2010. The return on Tuesdays for the SGD is found to be significantly (at a 10 per cent
level) different from zero. Even though these findings are no proof for the existence of a DotW effect,
(since the Wald-tests are not significant) returns that significantly differ from zero could have resulted in
abnormal returns for the afore mentioned currencies in the afore mentioned periods. These findings
support the results found by Aydoğan and Booth (2003) who also found significant different returns for
particular days of the week for only a few exchange rates.

However, since the results of the Wald-test do not show significant differences within a week, it should
be concluded that the DotW effect does not exist within the exchange rates used for this research for
these particular periods. This supports the conclusions of Yamori and Mourdoukoutas (2003) and Yamori
and Kurihara (2004) who conclude that the DotW effect disappears in more recent periods of their
research. A possible explanation for this might be that markets have become more and more efficient
over time thereby reducing the inefficiency which led to the DotW effect in the past.

Based upon the findings related to the DotW it should be concluded that the return on a particular day
of the week does not significantly differ from other days in that particular week. Therefore hypothesis
1a cannot be rejected. Nevertheless, the return on a particular day of the week does significantly differ
from zero. Even though this is just the case for four currencies, hypothesis 1b should be rejected.

5.2.2 January effect

The findings related to the January effect are presented in Table 5. No significant evidence was found for
the January effect in the period 1990-1998. This finding conflicts with the results of Agrawal and Tandon
(1994), Chen and Chan (1997) and Haug and Hirschey (2006). Those studies did find evidence for the
existence of the January effect.

When looking at Table 5 evidence for the existence of the January effect is weak since evidence has only
been found for the NZD that the return during the month January differs significantly from zero at a ten
per cent level. Since the F-value for the January effect is not significant for any exchange rate, it should
20
Master thesis Robert Zandbergen

be concluded that the January effect did not exist in the sample tested during the period 1990-2010. A
possible explanation for finding only one exchange rate showing the existence of the January effect may
be the fact that exchange rate markets have become more efficient. As a result the January effect has
disappeared. These results support Swinkels and Van Vliet (2011) who concluded that the January effect
has weakened.

A notable outcome is that the mean return for the other months (excluding January) differs significantly
(at a ten per cent level) from zero for the GBP during the period 1999-2010. Possible explanations for
this could be that the GBP becomes stronger relative to other currencies due to the several crises (9/11,
Credit Crisis and European Debt Crisis) which hit the financial world during the second sub-period. As a
consequence the exchange rate from the GBP to the AUD increases thereby making the return on this
particular exchange rate significantly different from zero. Research to find an explanation for this result
could be the subject of further research.

As a result hypothesis 2a should not be rejected since no evidence has been found that the mean return
during January differs significantly from the mean returns during the rest of the year. Hypothesis 2b,
which states that the return during the month January/Other months does not significantly differ from
zero, should be rejected at this time since evidence for a significantly different return than zero was
found for the NZD. However, it should be noted that this is not really convincing evidence as the effect
was only found for one exchange rate (from a total of 8 exchange rates).

5.2.3 Turn of the Month effect

The TOM effect (see Table 5) is only found in the period 1999-2010 for the JPY. The mean return at
these days during the month is 0.084 at a ten per cent significance level. This indicates that the returns
during the TOM have been 0.084 per cent per trading day, which is found to be significantly different
from zero. Even though the evidence found is limited it supports the results of Lakonishok and Smidt
(1988), Agrawal and Tandon (1994) Kunkel, Compton and Beyer (2003) and Aydoğan and Booth (2003).
Note that the results found by the latter shows a significantly negative return. But as explained at the
theory section when the exchange rate one way is negative, the other way around the exchange rate is
positive. Therefore the evidence found is also supported by their research.

The hypothesis that the return during the TOM differs significantly from the return throughout the
entire period cannot be rejected since the F-value (Wald-test) is not significant for any exchange rate in
either sub-periods. The hypothesis which state that the return during the TOM is significantly different
from zero should be rejected as findings show that the return during trading days at the TOM are
significantly different from zero for the JPY.

21
Master thesis Robert Zandbergen

Table 5 – Coefficients OLS Regression – January effect and TOM (Note: The returns mentioned under the different days per week
are the coefficients as acquired through the OLS regression. Numbers in the parentheses are the standard errors which are
heteroscedasticity consistent due to the White-test. The column “Wald” refers to the Wald-test performed indicating whether
the returns during the effect (January and TOM) differs significantly from the mean returns during the other months (January) or
the whole period (TOM)).

22
Master thesis Robert Zandbergen

5.2.4 Holiday effect

The holiday effect (Table 6) has been divided into two different effects, namely the pre- and the post-
holiday effect. Evidence for the pre-holiday effect has been found for the GBP for the time period 1999-
2010. The mean return on the first trading day after an Australian holiday amounts to 0.112971 per
cent. This result is significant at a ten per cent significance level, indicating that the return on the last
trading day prior to Australian holidays is significantly different from zero. Furthermore the F-value
indicates that the difference between the mean returns for the pre-holiday, post-holiday and the whole
period is significant. This finding supports that a positive return (from a GBP – AUD exchange rate
perspective) could have been established during the period 1999-2010.

The findings of this research support the results of Lakonishok and Smidt (1988), Pettengill (1989), Ariel
(1990) and Vergin and McGinnis (1999) who found evidence that the mean return on the last trading
day prior to a holiday is significantly different from returns during the other trading days of the year.
However, no evidence is found that supports the findings of these researchers regarding a significantly
negative return on the first trading day after a holiday.

The results found in this research can only be supported by prior research to a small extent, since only
for the GBP a pre-Holiday effect was found and only for the period 1999-2010. Prior research of for
example Lakonishok and Smidt (1998) and Vergin and McGinnis (1999) found more evidence for the
existence of the HOL effect. However, the results of this research follow the trend that calendar effects
have become weaker over time due to increasing efficiency. This could be the reason that the HOL effect
was only found for one exchange rate. Suggestions for further research should therefore be to use data
for a longer time period to see the development of existence of calendar effects over time.

The hypothesis regarding the pre-holiday effect compared to the mean return for trading days that do
not qualify as pre-holiday, do not significantly differ. As a consequence hypothesis 4a cannot be
rejected. The hypothesis regarding the post-holiday effect can be rejected since significant evidence has
been found that this effect exists in the exchange rate between the JPY and the AUD. Note that the
result found has been found in the most recent period of the research sample. This conflicts with the
general idea that calendar anomalies tend to weaken over time as markets become more efficient.

The hypotheses for the HOL effect does significantly differ from the mean returns during the whole
period tested. However, this is only the case for the GBP. For this exchange rate the return on pre-
Holidays is significantly different from zero during the period 1999-2010. As a result hypothesis 4b
should be rejected.

23
Master thesis Robert Zandbergen

Table 6 – Coefficients OLS Regression – HOL effect (Note: The returns mentioned under the different days per week are the
coefficients as acquired through the OLS regression. Numbers in the parentheses are the standard errors which are
heteroscedasticity consistent due to the White-test. The column “Wald” refers to the Wald-test performed indicating whether
the returns during the HOL are significantly different from the mean return during the whole period).

24
Master thesis Robert Zandbergen

5.2.5 End of the Year effect

In Table 7 the results for the EotY are shown.

EotY (1)
The mean return for the period from December 15 till 23 shows a significant result for the CHF. The
mean return during these days is -0.183 and differs significantly from zero at a five per cent significance
level. This result was found for the time period 1999-2010. This is the only result found and therefore
the result is not representative for the whole sample.

EotY (2)
For the trading days between Christmas and New Year’s Day (December 27 till December 30) the results
are more distinct. Evidence is found that the return during these trading days differs significantly from
zero for the period 1999-2010 for the USD (0.321 per cent), JPY (0.387 per cent), GBP (0.264 per cent),
NZD (-0.206 per cent), HKD (0.319 per cent) and for the SGD (0.228 per cent). For the USD, JPY and the
HKD the results are significant at a one per cent level, for the ZD and the SGD the results are significant
at a five per cent level and for the GBP the result is significant at a ten per cent level.

For 6 out of the 8 exchange rates included in this research evidence is found for the existence of the
EotY (2) effect. However, the F-value is only significant for three out of 6 exchange rates (USD, GBP and
SGD) thereby indicating that for these three rates the returns during the effects and the whole year do
significantly differ. This is evidence that indicates that the returns during the trading days from
December 27 up and including December 30 lead to a significantly different return compared to the
mean return for the whole period. Except for the exchange rate for the NZD to the AUD the returns
would have been positive from an AUD perspective. Next to this, it is notable that the results found are
solely for the period 1999-2010. No EotY (2) effect has been found for the period 1990-1998.

EotY (3)
In addition to EotY (1) and (2) evidence for a significantly different return from zero during the trading
days December 24 and December 31 (if these are trading days) has been found for the USD, the GBP and
the HKD (all at a one per cent significance level) for the timeframe 1999-2010. As mentioned under the
results of EotY (2) for the USD and the GBP the results of the F-test indicate that the returns during the
EotY are significantly different from the mean return during the whole period. Once more it should be
noted that the results found are solely for the period 1999-2010 and no significant results are found for
the period 1990-1998.

The findings for the EotY in this research support the results of prior research conducted by Lakonishok
and Smidt (1988) as well as research conducted by Agrawal and Tandon (1994). This research also partly
supports the evidence found by Hansen, Lunde, and Nason (2005), which provides evidence for a
significantly different return during the second half of December. However, in the research of Hansen,
Lunde and Nason (2005) the EotY effect disappears during the 1990s where it existed during the 1980s.
This research supports that there is no evidence during the 1990s but proves that the effect is still alive
since during the period 1999-2010 the EotY effect existed. As a result the hypotheses stated in the
research method that for each EotY effect tested no significantly different return would be found should

25
Master thesis Robert Zandbergen

be rejected. Furthermore evidence is found that the returns during the EotY differ significantly from the
mean return and therefore hypothesis 5b should also be rejected.

Table 7 – Coefficients OLS Regression – EotY effect (Note: The returns mentioned under the different days per week are the
coefficients as acquired through the OLS regression. Numbers in the parentheses are the standard errors which are
heteroscedasticity consistent due to the White-test. The column “Wald” refers to the Wald-test performed indicating whether
the returns during the HOL are significantly different from the mean return during the whole period).

26
Master thesis Robert Zandbergen

6 Conclusions and discussion

Based upon previous research it is clear that in general calendar anomalies tend to decrease over time
as markets become more efficient. However, since only a limited number of studies look into more
recent periods this research complements prior research. This research is aimed to answer the following
research question:

Do calendar effects still exist in the foreign exchange market?

The effects included in this research are the DotW, January effect, TOM, HOL and EotY effect and tests
whether these effects exist between a foreign currency relative to the AUD. For each calendar effect is
tested whether they existed during the sample period or not. The sample exists of daily exchange rates
for the USD, JPY, GBP, CAD, CHF, NZD, HKD and SGD during the period 1990-2010. This period has been
divided into two sub-periods namely 1990-1998 and 1999-2010.

In general limited evidence was found for the existence of calendar effects in the Australian foreign
exchange market. This supports the findings of prior research, which concludes in general that the
calendar effects tend to weaken or even vanish through time as markets become more efficient.
However, strong evidence has been found for the existence of the EotY effect in the Australian foreign
exchange market.

This research provides little evidence for the DotW. In the sample period 1990-1998 the returns on
Tuesdays differs significantly from zero for the GBP and the SGD. During the sample period 1999-2010
the returns for the GBP (Monday) and CAD (Friday) differ significantly from zero. Nevertheless, since the
F-value for the results found is not significant, it should be concluded that the DotW effect did not exist
during these periods for the exchange rates tested in this research. This supports the results of Yamori
and Mourdoukoutas (2003) and Yamori and Kurihara (2004) who conclude that the DotW effect
disappears in more recent periods of their research. This is an important finding, since only limited
research has been performed on recent data.

For the January effect, no evidence was found within the data used. This means that the mean return
during the month January does not significantly differ from the mean return during the rest of the
period. This finding conflicts with research of Agrawal and Tandon (1994), Chen and Chan (1997) and
Haug and Hirschey (2006) who did find that the January effect existed. In addition no evidence was
found that the mean return during the month January significantly differs from zero. Nevertheless, the
findings of this research support the results of Swinkels and Van Vliet (2011) who found that recently
this effect has become weaker. However, for the NZD the return during the month January did
significantly differ from zero (0.055524). It should be noticed that two recent studies (this one as well as
Swinkels and Van Vliet (2011) come to a similar conclusion regarding the January effect.

Similar to the results for the DotW effect as well as the January effect little evidence was found for the
TOM effect for the period 1990-1998. During the second sub-period (1999-2010) the mean return is
significantly different from zero with a return of 0.084 per cent per TOM day. This means that during the
last trading day of month 1 and the first four trading days during month 2 the mean return for these
days equals 0.084 per cent per trading day. However, the F-value indicates that there is no evidence that
27
Master thesis Robert Zandbergen

the returns during the TOM (JPY) differs significantly from the mean return during the whole period. As
a consequence, the TOM effect has not been present for the JPY to the AUD. This conflicts with findings
of Lakonishok and Smidt (1988), Agrawal and Tandon (1994) Kunkel, Compton and Beyer (2003) and
Aydoğan and Booth (2003) who found that the return during the TOM effect differs significantly from
the return during the rest of the period tested.

For the pre-holiday effect evidence has been found for Japan for the time period 1999-2010. The mean
return on the first trading day after an Australian holiday amounts to 0.112971 per cent and significantly
differs from the mean return during the whole sub-period. The F-value indicates that the pre-Holiday
effect existed during for the JPY during the period 1999-2010. No evidence was found for the post-
holiday effect. Even though the evidence found for the HOL effect in this research is limited, this finding
supports prior research of Lakonishok and Smidt (1988), Pettengill (1989), Ariel (1990) and Vergin and
McGinnis (1999) who concluded from their studies that the mean returns on the last trading day prior to
a holiday are significantly different from returns during the other trading days of the year. This research
however offers a more up-to-date view on the HOL effect and shows that this effect existed but has
weakened over time.

For all four sub-effects for the EotY effect evidence was found. However, the strongest evidence has
been found for the EotY (2) (trading days between December 27 until December 30). During these
trading days the return significantly differs from zero for in the period 1999-2010 for 6 out of 8 exchange
rates (USD, JPY, GBP, NZD, HKD and the SGD). The returns for the USD, GBP and the SGD during the EotY
(2) are significantly different from the mean return during the whole period. As a consequence it can be
concluded that the EotY (2) effect existed during the period 1999-2010. Evidence for a significantly
different return from zero has been found for the EotY (3) (the last trading day prior to Christmas and
prior to New Year’s Day) for the USD, GBP and the HKD. These returns are significantly different from
the mean return during the whole period, which means that the EotY (3) effect existed during the period
1999-2010 for 3 out of 8 exchange rates. These findings support the results of prior research conducted
by Lakonishok and Smidt (1988) as well as research conducted by Agrawal and Tandon (1994).

The findings confirm that in more recent periods less evidence is found for the existence of calendar
effects. These results are important since only limited research to more recent exchange rates have
been conducted and published. With this research I hope to add to the literature regarding calendar
anomalies in exchange rates. My findings for the limited existence of calendar effects are in accordance
with the results of for example Yamori and Kurihara (2004) and Swinkels and Van Vliet (2011).

Suggestions for further research are different currencies that have not been taken into account in this
research. Furthermore it might be an interesting research topic to look at the reasons why some
calendar effects disappeared during the 1990s but are found in the period 2000-2010. Another
interesting research topic could be conducting research to the development of calendar effects in the
exchange rates used for this research. One should take a sample which takes into account periods prior
to the periods used for this research. Another interesting topic to investigate is why the return between
the GBP to the AUD significantly differs from zero, whereas other exchange rates do not differ
significantly from zero.

28
Master thesis Robert Zandbergen

7 References

Agrawal, A., and Tandon, K., (1994). Anomalies or illusions? Evidence from stock markets in eighteen
countries, Journal of International Money and Finance, no. 13, p. 83-106.

Ariel, R., (1990). High stock returns before holidays: Existence and evidence on possible causes. Journal
of Finance, vol. 45, p.1611-1626.

Aydoğan, K., and Booth, G. (2003). Calendar anomalies in the foreign exchange markets, Applied
Financial Economics, vol. 13, no. 5, 353-360.

Berumunt, H., Coskun, M.N., and Sahin, A., (2007). Day of the week effect on foreign exchange market
volatility: Evidence from Turkey, Research in International Business and Finance, vol. 21, p. 87-97.

Chen, C.R., and Chan, A., (1997). From T-bills to stocks: seasonal anomalies revisited, Journal of Business
Finance & Accounting, vol. 24, no. 5, p. 573-592.

Cornett, M.M., Schwarz, T.V., and Szakmary, A.C., (1995). Seasonalities and intraday return patterns in
the foreign currency future market, Journal of Banking & Finance, vol. 19, p. 843-869.

Fama, E.F., (1998). Market efficiency, long-term returns, and behavioral finance, Journal of financial
economics, vol. 49, p. 283-306.

Hansen, P.R., Lunde, A., and Nason, J.M., (2005). Testing the significance of calendar effects, Federal
Reserve Bank of Atlanta working paper 2005, no. 2, January 2005.

Haug, M., and Hirschey, M., (2006). The January effect, Financial Analysts Journal, vol. 62, no. 5,
p. 78-88.

Holden, K., Thompson, J., and Ruangrit, Y., (2005). The Asian crisis and calendar effects on stock returns
in Thailand, European Journal of Operational Research, vol. 163, p. 242-252.

Jacobs, B.I., and Levy, K.N., (1988). Calendar anomalies: abnormal returns at calendar turning points,
Financial Analysts Journal 44, no. 6, p. 28-39.

Jaffe, J., and Westerfield, R., (1985). The Week-end effect in common stock returns: the international
evidence, Journal of Finance, vol. 40, no. 2, p. 433-454.

Ke, M., Chiang, Y., and Liao, T.L. (2007). Day-of-the-week effect in the Taiwan foreign exchange market,
Journal of Banking & Finance, vol. 31, p. 2847-2865.

Kunkel, R.A., Compton, W.S., and Beyer, S., (2003). The turn-of-the-month effect still lives: international
evidence, International Review of Financial Analysis, vol. 12, p. 207-221.
29
Master thesis Robert Zandbergen

Lakonishok, J., and Smidt, S., (1988). Are Seasonal Anomalies Real? A Ninety-Year Perspective, The
Review of Financial Studies, vol. 1, no. 4, p. 403-425.

Pettengill, G.N., (1989) Holiday closings and security returns, Journal of Financial Research, vol. 12, p. 57-
67.

Rogalski, R.J., (1984). New findings regarding day-of-the-week returns over trading and non-trading
periods: a note, Journal of Finance, vol. 39, no. 5, p. 1603-1614.

Swinkels, L., and Vliet, van, P., (2011). An anatomy of calendar effects, Social Science Research Network
working paper, July 2011.

Vergin, R.C., and McGinnis, J., (1999). Revisiting the holiday effect: is it on holiday? Applies Financial
Economics, vol. 9, p. 477-482.

Vieira, C., and Vieira, I., (2007). Seasonalities in Eastern foreign exchange markets: A barrier to Euro
adoption? Transition Studies Review, vol. 14, no. 2, p. 283-294.

Wachtel, S.B., (1942). Certain observations in seasonal movements in stock prices, Journal of Business,
vol. 15, p.184-193.

Wang, K., Li, Y., and Erickson, J., (1997). A new look at the Monday effect, Journal of Finance, vol. 52, no.
5, p. 2171-2186.

Yamori, N., and Mourdoukoutas, P., (2003). Does the day-of-the-week effect in foreign currency markets
disappear? Evidence from the Yen/Dollar market, International Financial Review, vol. 4,
p. 447-463.

Yamori, N., and Kurihara, Y., (2004). The day-of-the-week effect in foreign exchange markets: multi-
currency evidence, Research in International Business and Finance, vol. 18, p. 51-57.

30
Master thesis Robert Zandbergen

Appendix A

Test of normality

The data has been tested for normality based on Skewness and Kurtosis. When the data is normally
distributed, dividing the Skewness or Kurtosis by its standard error should result in a value between
-1.96 and + 1.96. Table 8 shows that the data of none of returns is normally distributed.

Table 8 – Test for normality based on Skewness and Kurtosis

Since the p-value of the Kolmogorov-Smirnov (Table 9) test for each currency is 0,0000 it shows that the
data is not normally distributed. This confirms the conclusion from the test based on the Skewness and
Kurtosis.

Table 9 – Kolmogorov-Smirnov Test

31