«TIME OF THE DAY ЕFFECT» AS AN ANOMALY OF EFFICIENT MARKET HYPOTHESIS

O. L. Plastun, I. A. Makarenko

Abstract


One of the most critical arguments for the implementation of the efficient markets hypothesis is the presence of so-called «anomalies», that is, empirical evidence of abnormal behavior of asset prices, which are not consistent with market efficiency. Most of the papers devoted to this direction do not take into account the transaction costs. Their presence affects ability of the traders to generate profit. In this paper, we investigate the possibility to make abnormal profits by replication activities of traders in the «time of the day effect» anomaly. The analysis of this anomaly based on the trading robot that simulates the actions of traders and allows to incorporate variable transaction costs (spreads). The results suggest that trading strategies aimed to use patterns «time of the day effect» do not generate extra profits. Moreover, there is no significant difference between pre-crisis, crisis and post-crisis periods in this context.


Keywords


efficient market hypothesis, anomaly, time of the day effect, trading strategy, transaction costs

References


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DOI: https://doi.org/10.18371/fcaptp.v2i21.91069

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ISSN (print) 2306-4994, ISSN (on-line) 2310-8770