The question pertains to a simple phenomenon.
There is gold futures listed on Exchange A and Exchange B.
Exchange A and Exchange B overlap times with A and B starting 8 hours later and A and B closing together.
On Exchange A, it trades for 8 hours. On Exchange B, it trades for 16 hours.
I calculate hourly returns for both exchanges. Since this is Gold Futures, they are highly correlated.
Thus Sum of hourly returns on B is greater than Sum of hourly returns on A. However Daily returns of Close-Close of both A and B are same.
If i extrapolate Daily returns to Annually, then sqrt(252)* Daily Returns shall give us the Annualized Returns.
How do i resolve the hourly and daily returns dilemma?