Forex Questions and Answers - FXAnswer

In Forex, it is the Friday effect when there is inclination in the market to rally as closing time approaches at the end of the week, specifically on Friday.

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fxpie

1 year ago

People who follow the stock markets have noted that securities tend to perform most highly on Fridays, and to have relatively weak returns on Mondays. There has been a great deal of speculation about the mechanisms behind the weekend effect, and a number of papers have been written to put forth various theories and explanations.
One theory is that companies often opt to release bad news which could affect stock value on Friday afternoons so that it will break during the weekend. Breaking news on the weekends tends to attract less attention, and companies hope that a major breaking item will obscure their bad news by Monday morning, ensuring that it gets shuffled to the back page of the newspaper. This strategy may be effective for minimizing awareness of bad news, but it can contribute to the weekend effect, because savvy traders keep a close eye on the news even during the weekends, and they will react quickly to bad news when the trading floor opens again on Mondays.
Other researchers have attributed the weekend effect to psychology. On Fridays, traders are riding high and they may feel confident, driving up the volume of trading and keeping returns high. By Monday morning, they've sunk back into a slump, keeping trading sluggish and optimism low. A “case of the Mondays” is certainly not a psychological issue restricted to stock traders.
In the United States, the weekend effect may be linked with the fact that the United States Treasury holds its regular auctions on Mondays. These can throw off the volume of trading. There have also been suggestions that the effect may be caused by short selling, or by after hours trading activities which have a chance to snowball over the weekend.
How does all these effect forex.? Well for one currencies move according to stocks as investors move their money. Hence if we observe Mondays tend to be slow with low volatility while Fridays tend to have more movement.

by

RPT

1 year ago

The weekend effect has been a regular feature of stock trading patterns for many years. For example, according to a study by the Federal Reserve, prior to 1987 there was a statistically significant negative return over the weekends. However, the study did mention that this negative return had disappeared in the period from post-1987 to 1998. Since 1998, volatility over the weekends has increased again, and the phenomenon of the weekend effect remains a much debated topic

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thegreeks

1 year ago

The weekend effect (also known as the Monday effect, the day-of-the-week effect or the Monday seasonal) refers to the tendency of stocks to exhibit relatively large returns on Fridays compared to those on Mondays. This is a particularly puzzling anomaly because, as Monday returns span three days, if anything, one would expect returns on a Monday to be higher than returns for other days of the week due to the longer period and the greater risk.

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Kingpin

1 year ago

A phenomenon in financial markets in which stock returns on Mondays are often significantly lower than those of the immediately preceding Friday. Some theories that explain the effect attribute the tendency for companies to release bad news on Friday after the markets close to depressed stock prices on Monday. Others state that the weekend effect might be linked to short selling, which would affect stocks with high short interest positions. Alternatively, the effect could simply be a result of traders' fading optimism between Friday and Monday.

Investopedia explains Weekend Effect
The weekend effect has been a regular feature of stock trading patterns for many years. For example, according to a study by the Federal Reserve, prior to 1987 there was a statistically significant negative return over the weekends. However, the study did mention that this negative return had disappeared in the period from post-1987 to 1998. Since 1998, volatility over the weekends has increased again, and the phenomenon of the weekend effect remains a much debated topic.

by

Warren

1 year ago