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Weekly Pattern of Exchange Rate Risks: Evidence from Ten Asian-Pacific Currencies

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  • Gordon Tang

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    Abstract

    This paper examines the day-of-the-week effect on the currency returns of ten Asian-Pacific countries and differs from previous studies in that it tests directly the effect on higher moments of currency returns. Using ten-year daily data, the results first show that currency returns are non-normally distributed, particularly with very large kurtosis. The hypothesis of equal higher moments (e.g., skewness or kurtosis or both) cannot be rejected by any pair of weekdays only for the Australian dollar. For the remaining nine currencies, the same hypothesis is rejected by at least one pair of weekdays. Six currencies reject the hypothesis in all pairs of weekdays, supporting the existence of the day-of-the-week effect on higher moments. Further analysis shows that Rogalski's effect exists on the higher moments of three currencies because the day-of-the-week effect exists only in non-January months. Sub-period analysis indicates that the weekly patterns on higher moments are quite consistent across two sub-periods for all currencies except the Taiwanese dollar. Copyright Kluwer Academic Publishers 1998

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    File URL: http://hdl.handle.net/10.1023/A:1010050025656
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    Bibliographic Info

    Article provided by Springer in its journal Asia-Pacific Financial Markets.

    Volume (Year): 5 (1998)
    Issue (Month): 3 (November)
    Pages: 261-274

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    Handle: RePEc:kap:apfinm:v:5:y:1998:i:3:p:261-274

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    Web page: http://springerlink.metapress.com/link.asp?id=102851

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    Keywords: currencies; exchange rate risks; weekly pattern;

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    1. Rogalski, Richard J, 1984. " New Findings Regarding Day-of-the-Week Returns over Trading and Non-trading Periods: A Note," Journal of Finance, American Finance Association, American Finance Association, vol. 39(5), pages 1603-14, December.
    2. McFarland, James W & Pettit, R Richardson & Sung, Sam K, 1982. " The Distribution of Foreign Exchange Price Changes: Trading Day Effects and Risk Measurement," Journal of Finance, American Finance Association, American Finance Association, vol. 37(3), pages 693-715, June.
    3. Jaffe, Jeffrey F & Westerfield, Randolph, 1985. " The Week-End Effect in Common Stock Returns: The International Evidence," Journal of Finance, American Finance Association, American Finance Association, vol. 40(2), pages 433-54, June.
    4. Peiro, Amado, 1994. "Daily seasonality in stock returns : Further international evidence," Economics Letters, Elsevier, vol. 45(2), pages 227-232, June.
    5. Scott, Robert C & Horvath, Philip A, 1980. " On the Direction of Preference for Moments of Higher Order Than the Variance," Journal of Finance, American Finance Association, American Finance Association, vol. 35(4), pages 915-19, September.
    6. Cornett, Marcia Millon & Schwarz, Thomas V. & Szakmary, Andrew C., 1995. "Seasonalities and intraday return patterns in the foreign currency futures market," Journal of Banking & Finance, Elsevier, vol. 19(5), pages 843-869, August.
    7. Singleton, J. Clay & Wingender, John, 1986. "Skewness Persistence in Common Stock Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(03), pages 335-341, September.
    8. French, Kenneth R., 1980. "Stock returns and the weekend effect," Journal of Financial Economics, Elsevier, Elsevier, vol. 8(1), pages 55-69, March.
    9. Aggarwal, Reena & Rivoli, Pietra, 1989. "Seasonal and Day-of-the-Week Effects in Four Emerging Stock Markets," The Financial Review, Eastern Finance Association, Eastern Finance Association, vol. 24(4), pages 541-50, November.
    10. Simkowitz, Michael A. & Beedles, William L., 1978. "Diversification in a Three-Moment World," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 13(05), pages 927-941, December.
    11. Gordon Tang, 1996. "Day-of-the-week effect on skewness and kurtosis: a direct test and portfolio effect," The European Journal of Finance, Taylor & Francis Journals, vol. 2(4), pages 333-351.
    12. Akgiray, Vedat & Geoffrey Booth, G. & Seifert, Bruce, 1988. "Distribution properties of Latin American black market exchange rates," Journal of International Money and Finance, Elsevier, Elsevier, vol. 7(1), pages 37-48, March.
    13. Harvey, Campbell R & Huang, Roger D, 1991. "Volatility in the Foreign Currency Futures Market," Review of Financial Studies, Society for Financial Studies, vol. 4(3), pages 543-69.
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