Day trading returns across volatility states

Christian Lundström ()
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Christian Lundström: Department of Economics, Umeå School of Business and Economics, Postal: Umeå University, S 901 87 Umeå, Sweden

No 861, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: This paper measures the returns of a popular day trading strategy, the Opening Range Breakout strategy (ORB), across volatility states. We calculate the average daily returns of the ORB strategy for each volatility state of the underlying asset when applied on long time series of crude oil and S&P 500 futures contracts. We find an average difference in returns between the highest and the lowest volatility state of around 200 basis points per day for crude oil, and of around 150 basis points per day for the S&P 500. This finding suggests that the success in day trading can depend to a large extent on the volatility of the underlying asset.

Keywords: Contraction-Expansion principle; Futures trading; Opening Range Breakout strategies; Time-varying market inefficiency (search for similar items in EconPapers)
JEL-codes: C21 G11 G14 G17 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2013-06-17, Revised 2017-03-03
New Economics Papers: this item is included in nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:umnees:0861

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