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Journal of Finance Vol. 65 No. 4 2010

Intraday Patterns in the Cross‐section of Stock Returns

Steven L. Heston1,2,3,4,5,6,7,8,9,10; Robert A. Korajczyk1,2,3,4,5,6,7,8,9,10; Ronnie Sadka1,2,3,4,5,11,6,7,8,9,10

1 Boston College · 2 HEC Montréal · 3 Northwestern University · 4 Institut National de la Statistique et des Etudes Economiques · 5 Citigroup · 6 Aarhus University · 7 Cornell University · 8 Centre for Research in Engineering Surface Technology · 9 Centre de Recherche en Économie et Statistique · 10 Brandeis University · 11 Jagannath University

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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.

DOI
10.1111/j.1540-6261.2010.01573.x
Volume
65
Issue
4
Pages
1369-1407
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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