اثر تقویم: عکس العمل بیش از حد تعطیلات آخر هفته  (و عواقب پس از آن) در نرخ FX نقطه  A calendar effect: Weekend overreaction (and subsequent reversal) in spot FX rates

1. Introduction Our paper identifies a calendar effect which we observe in the world’s largest market, the foreign exchange market. We call this effect ‘weekend overreaction’. Specifically, we observe exchange rate behaviours after a large weekend gap (i.e. a large price difference between Friday close and subsequent Monday open) and find significant overreaction in the majority of our sample. After a large weekend gap, most currency markets are likely to reverse in multiple horizons during the following week, which is consistent with the overreaction hypothesis. Out of the 16 currency pairs we examine, only one shows no significant reversal. We develop a reversal trading strategy based on this effect which we show is able to generate abnormal risk-adjusted returns (net of costs) up to more than 10% per annum. This result suggests that these currency markets might be weak-form inefficient and our study may be of interest to both academics and practitioners. For academics, we document the weekend overreaction and provide evidence against market efficiency while for practitioners, we propose a profitable trading strategy. Our work is motivated by the literature on stock price predictability after large price changes (e.g. Amini et al., 2013) and the vast literature on calendar effects (e.g. Urquhart and McGroarty, 2014) as well as the literature on overreaction. erreaction. The seminal paper on overreaction by Debondt and Thaler (1985) studied NYSE stocks from 1926 to 1982 and they hypothesise that if markets overshoot systematically, reversals are predictable from past data. Additional research by Debondt and Thaler (1987) shows that the winner-loser effect (i.e. overreaction) is not because of risk change or firm size, which is supported by Alonso and Rubio (1990), who confirm that the overreaction hypothesis is not rejected after considering firm size which only explains a part of profitability. Conversely, Zarowin (1990) replicates Debondt and Thaler (1985) and maintains that overreaction is due to the size effect, yet conceding that although size effect can explain long-term reversals (i.e. several years), short-term overreaction remains unexplained. In another paper, Fung et al. (2000) report reversals after large overnight price changes in S&P500 and Hang Seng Index stock futures between 1993 and 1996. The reversal magnitude is commensurate with the size of overnight price gaps and overreaction is a common effect. However, Atkins and Dyl (1990) warn that spreads may explain short-term reversals and lead to biased returns without careful consideration. Cox and Peterson (1994) study US stocks from 1963 to 1991 and find that in addition to spreads (i.e. bid-ask bounce), liquidity is important in reversals. Moreover, after a large daily price decline, they observe a momentum effect within 4–20 days instead of a reversal.