Intraday Patterns in the Cross-Section of Stock Returns

59 Pages Posted: 17 Jun 2009 Last revised: 27 May 2010

See all articles by Steven L. Heston

Steven L. Heston

University of Maryland - Department of Finance

Robert A. Korajczyk

Northwestern University

Ronnie Sadka

Boston College - Carroll School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: May 26, 2010

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.

Keywords: Return periodicity, Market Microstructure

JEL Classification: G12, G14

Suggested Citation

Heston, Steven L. and Korajczyk, Robert A. and Sadka, Ronnie, Intraday Patterns in the Cross-Section of Stock Returns (May 26, 2010). Available at SSRN: https://ssrn.com/abstract=1107590 or http://dx.doi.org/10.2139/ssrn.1107590

Steven L. Heston

University of Maryland - Department of Finance ( email )

Robert H. Smith School of Business
Van Munching Hall
College Park, MD 20742
United States

Robert A. Korajczyk

Northwestern University ( email )

Kellogg School of Management
2211 Campus Drive, Room 4357
Evanston, IL 60208-0898
United States
847-491-8336 (Phone)
847-491-7781 (Fax)

HOME PAGE: http://www.kellogg.northwestern.edu/faculty/directory/korajczyk_robert.aspx#research

Ronnie Sadka (Contact Author)

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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