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.
Original language | English (US) |
---|---|
Pages (from-to) | 1369-1407 |
Number of pages | 39 |
Journal | Journal of Finance |
Volume | 65 |
Issue number | 4 |
DOIs | |
State | Published - Aug 2010 |
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics