Steven L. Heston
University of Maryland - Department of Finance
Robert A. Korajczyk
Northwestern University - Kellogg School of Management
Ronnie Sadka
Boston College - Carroll School of Management
Lewis D. Thorson
University of Washington - Foster School of Business
Abstract
Over the post-decimalization period, we find a predictable pattern of return continuation in equities. Stocks whose relative returns are high in a given half-hour interval today tend to exhibit similar outperformance in the same half-hour period on subsequent days. The effect is stronger at the beginning and end of the trading day, but exists throughout the day. Percentage changes in trading volume exhibit a similar pattern, but do not explain the return pattern. These results suggest that strategically shifting the timing of trades can significantly reduce execution costs for institutional traders.
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