The Effect of Calendar Anomalies on the Cryptocurrency Market

Abstract

With the continuous development of financial markets, the traditional financial theory and the reality of the financial market are often colliding. Traditional financial theories based on investor rationality and efficient markets have been challenged like never before. A large number of empirical studies also show that financial investments are affected by subjective factors, such as peoples‘ behavior and feelings. Behavioral finance is a relatively new theoretical field compared to traditional financial theory, integrating theories of psychology, especially the behavioral sciences, into finance. Trading in the cryptocurrency market has gained momentum over the past few years and has become a new investment venue for investors, while understanding the calendar anomalies that may exist in the market can help investors adopt better investment strategy. The goal of this thesis is to examine the presence of the day of the week effect and the month of the year effect on the cryptocurrency market and try to give possible explanations from the perspective of behavioral finance, giving investors a better understanding of the cryptocurrency market. The goal was achieved by testing of the effects on three well-known cryptocurrencies-Bitcoin, Ethereum, and XRP. Results of statistical tests as well as GARCH model showed that the calendar effect was not so strong, or even didn´t exist, within used data sample.

With the continuous development of financial markets, the traditional financial theory and the reality of the financial market are often colliding. Traditional financial theories based on investor rationality and efficient markets have been challenged like never before. A large number of empirical studies also show that financial investments are affected by subjective factors, such as peoples‘ behavior and feelings. Behavioral finance is a relatively new theoretical field compared to traditional financial theory, integrating theories of psychology, especially the behavioral sciences, into finance. Trading in the cryptocurrency market has gained momentum over the past few years and has become a new investment venue for investors, while understanding the calendar anomalies that may exist in the market can help investors adopt better investment strategy. The goal of this thesis is to examine the presence of the day of the week effect and the month of the year effect on the cryptocurrency market and try to give possible explanations from the perspective of behavioral finance, giving investors a better understanding of the cryptocurrency market. The goal was achieved by testing of the effects on three well-known cryptocurrencies-Bitcoin, Ethereum, and XRP. Results of statistical tests as well as GARCH model showed that the calendar effect was not so strong, or even didn´t exist, within used data sample.