Do intraday week effect in currencies hourly trading reflect leverage and asymmetric anomalies? Policy implications for traders

Wajid Shakeel Ahmed, Muhammad Sohaib, Jamal Maqsood and Ateeb Siddiqui

Journal of Chinese Economic and Foreign Trade Studies, 2021, vol. 14, issue 3, 240-256

Abstract: Purpose - The purpose of this study is to determine if intraday week (IDW) effect of the currencies reflect leverage and asymmetric impact in currencies market. The study data set comprises of intraday patterns of 15 currencies from developed and emerging economies. Design methodology approach - The study applies the exponential generalized autoregressive conditional heteroscedasticity (E-GARCH) model technique to observe the IDW leverage and asymmetric effect after introducing hourly dummies variables, namely, IDWmon, IDWwed, IDWfrid and IDWfrid-mon. Findings - The study results favor the propositions and confirm that IDW effect do exist in the international forex markets in relation to hourly trading pattern for respective currencies. Mostly, currencies do depreciate on Monday and Wednesday compared to the rest of the days. However, on the last trading day, i.e. Friday currencies observe an appreciation pattern which is for both economies. The results have an evidence of leverage and asymmetric effect confirmed by the E-GARCH model as a result of press releases and influence by micro-factors in the currency markets. Practical implications - The study believes to have theoretical connection related to the better understanding of currencies trend for developed and emerging economies, as the IDW effect exists. Moreover, confirmation of both the leverage and asymmetric effect in observed currencies would be able to assist the investors in making rational choices during the trading hours and would confirm considerable profits through profit incentivized strategies. Originality value - The study not only add knowledge to the previous study work in relation to the hourly trading pattern of currencies with reference to the IDW effects but also highlights the leverage and asymmetric effect in currencies that will help in formulating future trading strategies particular to emerging economies.

Keywords: Asymmetric effects; E-GARCH; Intraday week; IDW effect; Leverage effects (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jcefts:jcefts-07-2020-0034

DOI: 10.1108/JCEFTS-07-2020-0034

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