Forex Trading Strategy That Might Be Executed Due to the Popularity of Gotobi Anomaly

Paper: arXiv 2301.13204

Authors: Hiroki Bessho, Takanari Sugimoto, Tomoya Suzuki

Abstract

Our previous research has confirmed that the USD/JPY rate tends to rise toward 9:55 every morning in the Gotobi days, which are divisible by five. This is called the Gotobi anomaly. In the present study, we verify the possible trading strategy and its validity under the condition that investors recognize the existence of the anomaly. Moreover, we illustrate the possibility that the wealth of Japanese companies might leak to FX traders due to the arbitrage opportunity if Japanese companies blindly keep making payments in the Gotobi days as a business custom.

Complexity vs Empirical Score

• Math Complexity: 2.5/10
• Empirical Rigor: 5.5/10
• Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper investigates a well-known market anomaly (Gotobi effect) in the USD/JPY forex market and explores potential trading strategies and corporate wealth leakage. It relies heavily on empirical observations and basic financial logic rather than advanced mathematical modeling. While the concept provides practical insights into market microstructure and arbitrage, the math is minimal and the scope remains narrow.

Research Flowchart

  flowchart TD
    A[Research Goal: Evaluate Trading Strategy & Risk of Wealth Leakage from Gotobi Anomaly] --> B[Input Data: High-Frequency USD/JPY Intraday FX Rates]
    B --> C[Methodology: Simulate Arbitrage Strategy around 9:55 AM on Days Divisible by 5]
    C --> D[Quantitative Analysis: Backtest Strategy Returns & Measure Company FX Costs]
    D --> E[Key Outcomes: Profitable FX Trading Strategy Validated & Corporate Wealth Leakage Risk Confirmed]