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      The “day-of-the-week” effects in the exchange rate of Latin American currencies Translated title: El Efecto “día de la semana” en el tipo de cambio de las monedas latinoamericanas

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          Abstract

          Abstract This paper examines the “day-of-the-week” anomaly in the foreign exchange market of six major Latin American countries’ currencies: (Argentina, Brazil, Chile, Colombia, Mexico, and Peru), all with respect to the United States’ dollar. The returns of daily exchange rates are stationary, so we use linear regressions combined with GARCH, TARCH and EGARCH models to explore the presence of the “day-of-the-week” anomaly. The results confirm the presence of “abnormal” effects in some of the currencies and in some days of the week, particularly on Fridays and Mondays. Moreover, volatility in exchange rates shows clustering behavior, as well as leverage effects, which are carefully modelled in our analysis. This paper contributes to the literatureby studying the “day-of-the-week” effects in currency exchange rate markets, a clear innovation with respect to the typical stock market analysis. The results reported are useful for foreign exchange market traders, currency exposure management decision makers, monetary authorities, and financial policy designers in the countries included in the study. Indeed, the results suggest the presence of a typical behavior of the exchange rate of all the currencies included in the sample.

          Translated abstract

          Resumen Este artículo examina la anomalía del “día de la semana” en los mercados de divisas de las monedas de los seis principales países latinoamericanos (Argentina, Brasil, Chile, Colombia, México y Perú), todas con respecto al dólar de los Estados Unidos. Los rendimientos de las tasas de cambio son estacionarios, por lo que utilizamos regresiones lineales combinadas con modelos GARCH, TARCH y EGARCH, para explorar la presencia de la anomalía del “día de la semana”. Los resultados confirman la presencia de efectos “anormales” en algunas de las divisas y en ciertos días de la semana, particularmente los viernes y los lunes. Además, la volatilidad en los tipos de cambio muestra un comportamiento de agrupamiento, así como efectos de apalancamiento, los cuales son cuidadosamente modelados en nuestro análisis. Este trabajo contribuye a la literatura al estudiar el efecto “día de la semana” en el mercado de tipos de cambio de moneda, una clara innovación con respecto al típico análisis del mercado accionario. Los resultados reportados son de utilidad para los corredores de tipo de cambio, los administradores de riesgo cambiario, las autoridades monetarias, y los diseñadores de política financiera de los países incluidos en el estudio. Efectivamente, los resultados sugieren la presencia de una conducta típica del tipo de cambio en todas las monedas incluidas en la muestra.

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          Most cited references 74

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          Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation

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            Conditional Heteroskedasticity in Asset Returns: A New Approach

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              Does the Stock Market Overreact?

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                Author and article information

                Journal
                rmef
                Revista mexicana de economía y finanzas
                Rev. mex. econ. finanz
                Instituto Mexicano de Ejecutivos de Finanzas, A. C. (México, Distrito Federal, Mexico )
                1665-5346
                2448-6795
                2019
                : 14
                : spe
                : 485-507
                Affiliations
                orgnameInstituto Tecnológico y de Estudios Superiores de Monterrey orgdiv1EGADE Business School Mexico
                Illnois orgnameRockford University United States
                Article
                S1665-53462019000500485 S1665-5346(19)01400000485
                10.21919/remef.v14i0.419

                This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

                Page count
                Figures: 0, Tables: 0, Equations: 0, References: 74, Pages: 23
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