Intraday Residual Reversal in the U.S. Stock Market

59 Pages Posted: 18 Mar 2024

See all articles by Jonathan Brogaard

Jonathan Brogaard

University of Utah - David Eccles School of Business

Jaehee Han

University of Utah - David Eccles School of Business

Hanjun Kim

University of Utah - David Eccles School of Business

Date Written: February 19, 2024

Abstract

Li et al. (2023) show that intraday risk factor exposure leads to predictable returns. In this paper, we focus on the unexplained price movements from the factor-based intraday model. We document an economically large and statistically significant return reversal based on the previous period’s residual return. This residual reversal strategy, which buys stocks with negative residuals and sells stocks with positive residuals, earns an annualized return of 162.3%. The strategy captures the returns to liquidity provision to the transitory component of stock returns.

Keywords: Residual Reversal, Market Efficiency, Intraday Market, Trading Strategy

JEL Classification: G11, G12, G14

Suggested Citation

Brogaard, Jonathan and Han, Jaehee and Kim, Hanjun, Intraday Residual Reversal in the U.S. Stock Market (February 19, 2024). Available at SSRN: https://ssrn.com/abstract=4731947 or http://dx.doi.org/10.2139/ssrn.4731947

Jonathan Brogaard (Contact Author)

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

HOME PAGE: http://www.jonathanbrogaard.com

Jaehee Han

University of Utah - David Eccles School of Business ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States

Hanjun Kim

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

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