Intra-Day Momentum

Abstract

There is limited evidence of intraday predictability both in the cross-section of US stock returns (see Heston et al., 2010) and in the time-series of the aggregate stock market (see Gao et al., 2015). I find that statistical time-series predictability does not imply economic profitability, whereas cross-sectional sorts on past performance see stocks, which lost or won the most in the morning, earn in the last half-hour of trading about 15.6 and 19.4\% in annualized terms, and well above the rest of the cross-section. The effect is fundamentally different from Heston et al. (2010) and is robust to stock characteristics, the day-of-week effect, variations in the formation and holding periods (afternoon), but exhibits some dependence on the sample period, suggesting that specific market mechanisms or frictions play a relevant role on intraday price formation.