End-of-Day Reversal

Abstract

Individual stocks experience sharp intraday return reversals in the cross-section during the last 30 minutes of the trading day. This "end-of-day reversal" pattern is economically and statistically highly significant, is distinct from market intraday momentum, and primarily comes from positive price pressure on intraday losers. The effect cannot be explained by liquidity or gamma hedging effects. Instead, two novel channels related to the attention-induced retail purchases and risk management by short-sellers at the end of the day are driving the effect.

Keywords: intraday returns, return predictability, asset pricing, high-frequency

JEL Classification: G11, G12