Exploring Calendar Anomalies and Volatility Dynamics in Cryptocurrencies: A Comparative Analysis of Day-of-the-Week Effects before and during the COVID-19 Pandemic

Sonal Sahu, Alejandro Fonseca Ramírez and Jong-Min Kim ()
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Sonal Sahu: Escuela de Negocios, Tecnologico de Monterrey, Monterrey 64700, Mexico
Alejandro Fonseca Ramírez: EGADE Business School, Tecnologico de Monterrey, Monterrey 66269, Mexico
Jong-Min Kim: Division of Science and Mathematics, University of Minnesota Morris, Moris, MN 56267, USA

JRFM, 2024, vol. 17, issue 8, 1-22

Abstract: This study investigates calendar anomalies and their impact on returns and volatility patterns in the cryptocurrency market, focusing on day-of-the-week effects before and during the COVID-19 pandemic. Using advanced statistical models from the GARCH family, we analyze the returns of Binance USD, Bitcoin, Binance Coin, Cardano, Dogecoin, Ethereum, Solana, Tether, USD Coin, and Ripple. Our findings reveal significant shifts in volatility dynamics and day-of-the-week effects on returns, challenging the notion of market efficiency. Notably, Bitcoin and Solana began exhibiting day-of-the-week effects during the pandemic, whereas Cardano and Dogecoin did not. During the pandemic, Binance USD, Ethereum, Tether, USD Coin, and Ripple showed multiple days with significant day-of-the-week effects. Notably, positive returns were generally observed on Sundays, whereas a shift to negative returns on Mondays was evident during the COVID-19 period. These patterns suggest that exploitable anomalies persist despite the market’s continuous operation and increasing maturity. The presence of a long-term memory in volatility highlights the need for robust trading strategies. Our research provides valuable insights for investors, traders, regulators, and policymakers, aiding in the development of effective trading strategies, risk management practices, and regulatory policies in the evolving cryptocurrency market.

Keywords: calendar anomalies; volatility; cryptocurrencies; day-of-the-week effect; GARCH model; dummy variables; ANOVA; COVID-19; EGARCH; GJR-GARCH; FIGARCH; Lo’s modified R/S test (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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