Title: The weekend effect: a fractional integration and trading robot analysis

Authors: Guglielmo Maria Caporale; Luis Gil-Alana; Alex Plastun; Inna Makarenko

Addresses: Department of Economics and Finance, Brunel University London, UB8 3PH, UK ' Faculty of Economics and ICS, University of Navarra, Pamplona, Spain ' Sumy State University, 57, Petropavlivska Street, 40000, Sumy, Ukraine ' Sumy State University, 57, Petropavlivska Street, 40000, Sumy, Ukraine

Abstract: This paper provides some new empirical evidence on the weekend effect, one of the most recognised anomalies in financial markets. Two different methods are used: 1) a fractional integration technique for the estimation of the degree of integration of the series (d); 2) a trading robot approach to examine whether or not there is such an anomaly giving rise to exploitable profit opportunities by replicating the actions of traders. The lowest orders of integration are generally found on Mondays, which can be seen as evidence for a weekend effect. However, the trading robot analysis shows that this anomaly cannot be exploited to make abnormal profits and, therefore, it is not inconsistent with the efficient market hypothesis (EMH).

Keywords: efficient market hypothesis; EMH; trading strategy; weekend effect.

DOI: 10.1504/IJBD.2017.084921

International Journal of Bonds and Derivatives, 2017 Vol.3 No.2, pp.114 - 131

Received: 13 Nov 2015
Accepted: 13 May 2016
Published online: 09 Jul 2017 *

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