Intraday patterns in the cross-section of stock returns

Steven L. Heston, Robert A. Korajczyk, Ronnie Sadka*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

46 Scopus citations

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 languageEnglish (US)
Pages (from-to)1369-1407
Number of pages39
JournalJournal of Finance
Volume65
Issue number4
DOIs
StatePublished - Aug 1 2010

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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