For this post, I want to take a look at the concept of intra-day momentum and investigate whether we are able to identify any positive signs of such a phenomenon occurring across (quite a large) universe of NYSE stocks. It has been suggested that, for the wider market in general at least, there is a statistically significant intra-day momentum effect resulting in a positive relationship between the direction of returns seen during the first half an hour of the trading day (taking the previous day’s closing price as the “starting value”) and the last half an hour of the day’s session. That is to say, it may be that a stock/index which displays a positive return early in the trading session, will be more likely to experience a positive return over the last part of the session.
The effect seems to have been first identified/posited by Gao, Han, Li and Zhou in their 2015 research paper (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2440866). In their research paper, they specifically look at high-frequency data regarding the S&P 500 ETF, and they test over 20 years’ worth of data – so it’s worth pointing out that I am going the “other way” somewhat. Where their study lacked depth (number of instruments studied), my data contains around 3000 individual stocks, however, where they tested over a long time period (20 years) my data spans only 1 year.
I have a feeling already that the mechanisms and forces that move the “overall market” and result in certain price patterns and behaviours, may not necessarily translate exactly over into the individual constituent stocks. We can but try…
