Risk and Return Around the Clock

Abstract

We investigate price discovery over the 24-hour trading day for equities, currencies, bonds, and commodities. Sizable price discovery occurs around the clock for most assets. For a given asset, intraday risk and return distributions are fairly similar, indicating a broadly constant risk-return-relationship during the day. Although the amount of price discovery varies signi cantly during the day and di ers across assets, price discovery is generally e cient around the clock. Most assets do not exhibit the U-shaped intraday volatility pattern that has been documented for US equities, even if only main trading hours are considered. Intraday spikes in volatility are driven by the open or close of the market for the respective asset or other assets and by macroeconomic announcements. Both di usion and jump risk are important drivers of intraday volatility patterns, and US macroeconomic news account for a sizable fraction of jump-driven volatility. For some { but not all { assets, the relationship between volume and volatility that can generally be observed during the trading day does not hold at the time of jumps, suggesting that traders anticipate large price moves at the time of scheduled announcements and market depth falls accordingly.