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INTRADAY PATTERNS IN EXCHANGE RATE OF RETURN OF THE CHILEAN PESO: NEW EVIDENCE FOR DAY-OF-THE-WEEK EFFECT

Published online by Cambridge University Press:  07 April 2010

Rafael Romero-Meza ,
Claudio A. Bonilla ,
Melvin J. Hinich  and
Ricardo Bórquez
Rafael Romero-Meza
Affiliation:
Universidad Adolfo Ibáñez
Claudio A. Bonilla*
Affiliation:
Universidad del Desarrollo
Melvin J. Hinich
Affiliation:
The University of Texas at Austin
Ricardo Bórquez
Affiliation:
Universidad Adolfo Ibáñez
*
Address correspondence to: Claudio A. Bonilla, Facultad de Economía y Negocios, Universidad del Desarrollo, Av. Las Condes 12438, Lo Barnechea, Chile; e-mail: cbonilla@udd.cl.
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Abstract

We use a new statistical test based on the signal coherence function to detect subtle periodicities in the Chilean exchange rate. We resort to a unique intraday data set that allows us to capture persistent cyclical movements during the day that challenge the random walk hypothesis. We provide a microstructural explanation for the observed behavior, and also look at the day-of-the-week effect for the Chilean peso and find that the different days of the week indeed have different behavior patterns. This is an important result for investment allocation and risk assessment.

Keywords

Foreign ExchangeMicrostructureEmerging EconomySignal CoherencePeriodicities

Information

Type
Articles
Information
Macroeconomic Dynamics , Volume 14 , Supplement S1: Nonlinear Time Series , May 2010 , pp. 42 - 58
Copyright
Copyright © Cambridge University Press 2010

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References

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