Intraday Patterns in the Cross-section of Stock Returns





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    • Heston is with the University of Maryland, Korajczyk is with Northwestern University, and Sadka is with Boston College. We thank Joseph Cerniglia, Ian Domowitz, Lisa Goldberg, Campbell Harvey (the editor), Ravi Jagannathan, Bruce Lehmann, Maureen O'Hara, Michael Pagano, Mark Seasholes, Avanidhar Subrahmanyam, Dimitri Vayanos, Julie Wu, the anonymous referees, and associate editor for comments. We are also grateful to seminar participants at the NBER Microstructure Meeting; Center for Research in Econometric Analysis of Time Series, Aarhus Universitet; Boston College; Brandeis University; Cornell University; CREST-INSEE, Paris; HEC Montréal; McGill University; Northwestern University; University College Dublin; University of Southern California; the Citigroup Quant Conference; Goldman Sachs; and PanAgora Asset Management. We thank Lew Thorson for computational assistance. We acknowledge financial support from PanAgora Asset Management and Korajczyk acknowledges the financial support of the Zell Center for Risk Research and the Jerome Kenney Fund.


Motivated by the literature on investment flows and optimal trading, we examine intraday predictability in the cross-section of stock returns. We find a striking pattern of return continuation at half-hour intervals that are exact multiples of a trading day, and this effect lasts for at least 40 trading days. Volume, order imbalance, volatility, and bid-ask spreads exhibit similar patterns, but do not explain the return patterns. We also show that short-term return reversal is driven by temporary liquidity imbalances lasting less than an hour and bid-ask bounce. Timing trades can reduce execution costs by the equivalent of the effective spread.