INTRADAY PATTERNS IN EXCHANGE RATE OF RETURN OF THE CHILEAN PESO: NEW EVIDENCE FOR DAY-OF-THE-WEEK EFFECT

Rafael Romero-Meza, Claudio Bonilla, Melvin Hinich and Ricardo Bórquez ()

Macroeconomic Dynamics, 2010, vol. 14, issue S1, 42-58

Abstract: We use a new statistical test based on the signal coherence function to detect subtle periodicities in the Chilean exchange rate. We resort to a unique intraday data set that allows us to capture persistent cyclical movements during the day that challenge the random walk hypothesis. We provide a microstructural explanation for the observed behavior, and also look at the day-of-the-week effect for the Chilean peso and find that the different days of the week indeed have different behavior patterns. This is an important result for investment allocation and risk assessment.

Date: 2010
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