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Stats › Intraday and market microstructure › Intraday momentum

The first half hour of trading predicts the last half hour

Timing on the first half hour: 1.08+1.08Timing on thefirst half hourBuy and hold: 0.29+0.29Buy and holdAlways long the last half hour: -0.18-0.18Always long thelast half hour

Sharpe ratio, SPY, 1 February 1993 to 31 December 2013. The third bar is the control that matters: there is no last-half-hour risk premium to harvest. The entire result comes from taking a direction, and taking it from the morning.

The sign of SPY's opening thirty minutes predicted its closing thirty minutes from 1993 to 2013, with a Sharpe ratio of 1.08 against 0.29 for buy and hold. Being always long into the close lost money, so the edge is the timing.

1.08Sharpe ratio of the timing strategy, 1993 to 2013, against 0.29 for buy and hold
1.6%In-sample R squared of the predictive regression, 1.2% out of sample
-1.11%Annualised return to simply being long in the last half hour every day
TwelveDeveloped markets of sixteen where the relation is significant

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