Abstract
We investigate the implications of index-based investing on intraday stock dynamics using a large high-frequency data set, which consists of trade prices sampled every five seconds for all SP the betas of stocks converge towards one during the day. We show these patterns can be attributed to a ''firm-specific open, index-based close'' intraday trading profile. We theoretically support our findings via a market impact model with time-varying informational shocks and trading demands from single-stock and index investors.
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