Abstract
Motivated by the literature on investment flows and optimal trading, we examine intraday predictability in the cross-section of stock returns. We find a striking pattern of return continuation at half-hour intervals that are exact multiples of a trading day, and this effect lasts for at least 40 trading days. Volume, order imbalance, volatility, and bid-ask spreads exhibit similar patterns, but do not explain the return patterns. We also show that short-term return reversal is driven by temporary liquidity imbalances lasting less than an hour and bid-ask bounce. Timing trades can reduce execution costs by the equivalent of the effective spread.
Finance Focus
Latest Links
This is a new multi-author volume, written by practitioners and academics in
their respective fields of expertise including Andrew Mayo, Subir Chowdhur,
Andrew Cox and Leslie L. Kossoff providing coverage in all aspects of operations
and performance within a company.