Intraday Patterns in the Cross-Section of Stock Returns

59 Pages Posted: 21 Nov 2009 Last revised: 14 Nov 2019

See all articles by Steven L. Heston

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

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). Journal of Finance, 2010, Vol. 65, No. 4, pp. 1369-1407, Available at SSRN: https://ssrn.com/abstract=1509466

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 (Contact Author)

Northwestern University - Kellogg School of Management ( email )

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

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States