Are You Trading Predictably?
Abstract (via SSRN):
Robert A. Korajczyk; Northwestern University – Kellogg School of Management
Ronnie Sadka; Boston College – Carroll School of Management
Lewis D. Thorson; University of Washington – Foster School of Business
Over the post-decimalization period, we find a predictable pattern of return continuation in equities. Stocks whose relative returns are high in a given half-hour interval today tend to exhibit similar outperformance in the same half-hour period on subsequent days. The effect is stronger at the beginning and end of the trading day, but exists throughout the day. Percentage changes in trading volume exhibit a similar pattern, but do not explain the return pattern. These results suggest that strategically shifting the timing of trades can significantly reduce execution costs for institutional traders.