DOES THE DAY-OF-THE-WEEK EFFECT IN FOREIGN CURRENCY MARKETS DISAPPEAR? EVIDENCE FROM THE YEN/DOLLAR MARKET

The anomalous patterns in foreign exchange markets have received relatively little attention in the literature. This paper empirically investigates the Day-of-the-Week effect in the yen-dollar currency market for three decades and confirms that such effect did exist for the period 1973–1989, but it disappears for the 1990s. The results remain unchanged when the business condition effect, the January effect, the holiday effect, and the first and last day of the month effect are controlled. The results suggest that financial deregulation in Japan has made foreign currency markets more efficient in recent years.