Intraday Anomalies and Market Efficiency: A Trading Robot Analysis

Guglielmo Maria Caporale, Luis Gil-Alana, Alex Plastun and Inna Makarenko ()

No 4752, CESifo Working Paper Series from CESifo

Abstract: One of the leading criticisms of the Efficient Market Hypothesis (EMH) is the presence of so-called “anomalies”, i.e. empirical evidence of abnormal behaviour of asset prices which is inconsistent with market efficiency. However, most studies do not take into account transaction costs. Their existence implies that in fact traders might not be able to make abnormal profits. This paper examines whether or not anomalies such as intraday or time of the day effects give rise to exploitable profit opportunities by replicating the actions of traders. Specifically, the analysis is based on a trading robot which simulates their behaviour, and incorporates variable transaction costs (spreads). The results suggest that trading strategies aimed at exploiting daily patterns do not generate extra profits. Further, there are no significant differences between sub-periods (2005-2006 – “normal”; 2007-2009 – “crisis”; 2010-2011 – “post-crisis).

Keywords: efficient market hypothesis; intraday patterns; time of the day anomaly; trading strategy (search for similar items in EconPapers)
JEL-codes: C63 G12 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp4752.pdf (application/pdf)

Related works:
Journal Article: Intraday Anomalies and Market Efficiency: A Trading Robot Analysis (2016)
Working Paper: Intraday Anomalies and Market Efficiency: A Trading Robot Analysis (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4752

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().