There have been numerous studies on the existence and effect of what is labelled as “calendar anomalies”, in the equities markets. Calendar anomalies are patterns observed consistently in the performance of equities, occurring from week to week, month to month and year to year. These are considered anomalies because they contradict the efficient market hypothesis (EMH), which states that no pattern whatsoever should exist in the financial markets, long enough for anyone to profit from it. The seasonal attributes of calendar anomalies has also earned them an alternate title, “seasonalities”.

Even though these seasonalities have been extensively examined and documented, this has only been done for the stock markets. As financial markets have different fundamental and trading characteristics, it is not clear whether these anomalies may exist in another market, such as forex. In order to try and understand their impact on the forex market we conducted a small study into one anomaly, known as the “Friday effect”.

The Friday effect may be described as the uncommonness of a sizably negative day on a Friday. There are a number of reasons attributed to this phenomenon, but none have been widely accepted yet. In any case, all studies were concerned with shares of companies and stock indices performance. This may have been due to the fact that the forex market has only been introduced to retail traders relatively recently, compared to the equities market and thus its accessibility prior to this was limited to big banks.

In order to assess the presence and effect of the Friday effect in the forex market, we chose EUR/USD as our benchmark. We note that the choice of the EUR/USD as a benchmark for the forex market was due to it being the most liquid currency pair and the strong correlations it exhibits with all other EUR and USD denominated pairs. Nevertheless, our research cannot be expected to capture and represent the whole forex market. We collected data for the past 50 consecutive Fridays, going back to March, 2011. We then analysed the performance of the currency pair over those Fridays, taking 00:00 GMT as our opening time and 23:59 GMT as our closing time.

Below is a synopsis of our findings, the results of which should be interpreted with a critical mind.

  • There were 26 negative versus 24 positive Fridays.
  • The total pips accumulated on the up days were 2131, compared to 2292 pips on the down days.
  • The average rise was 88.8 pips and maximum appreciation at 207 pips
  • The average decline was 88.2 pips and maximum depreciation 234 pips.

The above findings show an even occurrence of positive and negative days, as well as similar performance in terms of pips over the period of 50 Fridays studied. There appears to be no statistically significant evidence to support the hypothesis of a seasonal pattern on Fridays in the forex market. In essence it shows that Friday may well behave as any other day and trades should not be discouraged or encouraged expecting a particular pattern.

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