On the presence of a day-of-the-week effect in the foreign exchange market

The purpose of this paper is to study the presence of the day-of-the-week effect in the foreign exchange market using an extensive data set of six exchange rates and employing two alternative types of distributional assumptions and also distribution-free tests. Our findings support the hypotheses of higher Wednesday returns prior to October 1, 1981, for the British pound, the Canadian dollar, the Deutsch mark, the French franc, the Swiss franc and the Japanese yen. Pursuant to the change in the settlement procedures which took effect October 1, 1981, the differential Wednesday returns disappear.