On Intraday Risk Premia

Matthew Spiegel and Avanidhar Subrahmanyam

Journal of Finance, 1995, vol. 50, issue 1, 319-39

Abstract: This article presents a framework for analyzing the dynamic effects of anticipated large demand pressures on asset risk premia. The authors show that large institutions who can time their entry into the market will trade either at the open or during periods of unusual demand pressures. They show that if these institutions do enter later in the day, they trade in the same direction as institutions which provide liquidity continuously; institutions therefore appear to exhibit 'herding' behavior. The authors also explore how changing the uncertainty of demand pressures late in the day affects trading costs throughout the day. Copyright 1995 by American Finance Association.

Date: 1995
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