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.

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23. June 2010 by Miguel Barbosa
Categories: Curated Readings, Finance & Investing | Leave a comment

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