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Intraday Stock Returns, Time-Varying Risk Premia, and Diurnal Mood Variation

25 Pages Posted: 22 Nov 2000  

Lisa A. Kramer

University of Toronto - Rotman School of Management

Date Written: April 2001

Abstract

Previous papers on intraday and interday stock transactions have documented a variety of systematic patterns in spreads, volumes, returns, and returns volatility. Several theoretical models have also been proposed to explain the observed patterns, but none have fully explained the movement of returns during the course of the day. In this paper, I consider a mechanism by which intraday returns may vary in a systematic manner as a result of behavioral factors rooted in the psychology of depression. By surveying past studies in finance, I find evidence consistent with a close relationship between intradaily variation in human sentiment and patterns in intraday stock returns. In exploring this explanation, I find hourly returns do not follow the U-shaped pattern conventionally believed to hold for intraday returns. Instead, I find returns in the morning significantly exceed those in the afternoon across a variety of time periods and datasets, a novel discovery consistent with the behavioral explanation of returns.

Keywords: Intraday stock returns, behavioral finance

JEL Classification: G1

Suggested Citation

Kramer, Lisa A., Intraday Stock Returns, Time-Varying Risk Premia, and Diurnal Mood Variation (April 2001). Available at SSRN: https://ssrn.com/abstract=248293 or http://dx.doi.org/10.2139/ssrn.248293

Lisa A. Kramer (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-978-2496 (Phone)
416-971-3048 (Fax)

HOME PAGE: http://www.chass.utoronto.ca/~lkramer

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