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Reversal, Momentum and Intraday Returns

42 Pages Posted: 23 Jun 2017  

Haoyu Xu

Shanghai University of Finance and Economics

Date Written: April 30, 2017

Abstract

This paper studies the trades immediately after the market open and immediately before the market close. The trades in the morning positively predict future returns and cause price continuation. The trades in the afternoon negatively predict future returns and cause price reversals. The momentum trading strategies based on morning returns and the reversal trading strategies based on afternoon returns generate significant abnormal returns, which cannot be explained by standard risk factors including momentum and reversal factors. The results provide strong evidence that trades in the morning are mostly information driven and trades in the afternoon are mostly liquidity driven.

Keywords: Reversal, Momentum, Liquidity

JEL Classification: G11, G12, G14

Suggested Citation

Xu, Haoyu, Reversal, Momentum and Intraday Returns (April 30, 2017). Available at SSRN: https://ssrn.com/abstract=2991183

Haoyu Xu (Contact Author)

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, Shanghai 200433
China

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