Intraday Patterns in the Cross-section of Stock Returns

Steven L. Heston, Robert Korajczyk and Ronnie Sadka

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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.

Date: 2010-05
New Economics Papers: this item is included in nep-mst
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Published in Forthcomming: Journal of Finance 65 (4), 2010 1369-1407

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Journal Article: Intraday Patterns in the Cross‐section of Stock Returns (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1005.3535

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