Artificial neural network analysis of the day of the week anomaly in cryptocurrencies

Abstract

Anomalies, which are incompatible with the efficient market hypothesis and mean a deviation from normality, have attracted the attention of both financial investors and researchers. A salient research topic is the existence of anomalies in cryptocurrencies, which have a different financial structure from that of traditional financial markets. This study expands the literature by focusing on artificial neural networks to compare different currencies of the cryptocurrency market, which is hard to predict. It aims to investigate the existence of the day-of-the-week anomaly in cryptocurrencies with feedforward artificial neural networks as an alternative to traditional methods. An artificial neural network is an effective approach that can model the nonlinear and complex behavior of cryptocurrencies. On October 6, 2021, Bitcoin (BTC), Ethereum (ETH), and Cardano (ADA), which are the top three cryptocurrencies in terms of market value, were selected for this study. The data for the analysis, consisting of the daily closing prices for BTC, ETH, and ADA, were obtained from the Coinmarket.com website from January 1, 2018 to May 31, 2022. The effectiveness of the established models was tested with mean squared error, root mean squared error, mean absolute error, and Theil’s U1, and $${R}_{OOS}^{2}$$ R OOS 2 was used for out-of-sample. The Diebold–Mariano test was used to statistically reveal the difference between the out-of-sample prediction accuracies of the models. When the models created with feedforward artificial neural networks are examined, the existence of the day-of-the-week anomaly is established for BTC, but no day-of-the-week anomaly for ETH and ADA was found.

Calendar Anomalies in NFT Coins

“…Yaya and Ogbonna (2019) examined thirteen cryptocurrencies and concluded that none of their returns are affected by the DoW anomaly, but the volatility of BTC is different on Mondays and Fridays. Tosunoglu et al (2023) employed an artificial neural networks (ANN) algorithm to explore the DoW impacts on BTC, Ethereum, and Cardano and observed that only BTC exhibited it. Lastly, Verma et al (2023) investigated the effect of DoW on six cryptocurrencies and did not find any statistically significant results.…”

Eficiencia del mercado y anomalías de calendario pos-COVID: perspectivas de bitcoin y ethereum

“…Theiri et al (2022) contributed to this area of research by focusing on cryptocurrency liquidity during the Russia-Ukraine war, underscoring the crucial role of market liquidity in comprehending the day-of-the-week effect. Tosunoğlu et al (2023) advanced the literature by employing artificial neural networks to analyze the day-of-the-week anomaly in cryptocurrencies, offering insights into the predictability of various currencies. Furthermore, Bae and Kim (2022) explored robust anomaly scores in cryptocurrencies, highlighting the impact of network factors on cryptocurrency returns.…”

Volatility contagion between cryptocurrencies, gold and stock markets pre-and-during COVID-19: evidence using DCC-GARCH and cascade-correlation network

“…The ongoing debate over the value and role of cryptocurrencies has been fueled by contrasting views among prominent figures in the business and investment communities (Bazzanella and Gangemi 2023;Wu et al 2021;Xiao et al 2021;Xie et al 2019;Tosunoğlu et al 2023). On May 22, 2021, Elon Musk, the founder of SpaceX and CEO of Tesla, tweeted his support for cryptocurrencies, declaring a "battle" between digital currencies and fiat currencies.…”