Intraday Patterns in the Cross-Section of Stock Returns
Steven L. Heston
University of Maryland - Department of Finance
Robert A. Korajczyk
Northwestern University - Kellogg School of Management
Boston College - Carroll School of Management
May 26, 2010
Journal of Finance, Vol. 65, No. 4, pp. 1369-1407, Forthcoming
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.
Number of Pages in PDF File: 59
Keywords: Return periodicity, Market Microstructure
JEL Classification: G12, G14
Date posted: November 21, 2009 ; Last revised: May 27, 2010
© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo1 in 0.375 seconds