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I'm interested in analysis of day-on-day momentum of certain large indices. In particular, I'm interested in the predictive power of the sign of the price change of the first hour of trading with respect to the sign of the difference between the open and close price. For example, I'd be interested in the probability of a positive day-on-day price change conditional on losses/gains in the first part of the trading period.

Does anyone know of attempts of analyzing this idea? If not, would you expect a sufficiently great predictive power to make investigating this worthwhile?

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    $\begingroup$ I bet someone did and I don't think it will generate any excess returns after transaction costs. $\endgroup$ – Bob Jansen Dec 20 '17 at 8:12
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    $\begingroup$ You should do this test using futures prices (which are tradeable) rather than indexes which are not. And you should measure the influence of the first hour on the rest of the day NOT INCLUDING THE FIRST HOUR. $\endgroup$ – noob2 Dec 20 '17 at 13:30
  • $\begingroup$ @noob2 good idea. I meant tradable funds that track indices like s&p500. $\endgroup$ – pafnuti Dec 20 '17 at 13:31
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    $\begingroup$ It is a fun research project and not very hard to do. $\endgroup$ – noob2 Dec 20 '17 at 13:36
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I think there is not the exact replication of the momentum strategy you proposed in your question above.

Anyway, in Gao, Han, Li & Zhou (2015) the authours suggested a methodology that can be used to develop a momentum strategy model on the basis of your hypothesis.

Shown below the reference suggested:

GAO, Lei, et al. Intraday momentum: The first half-hour return predicts the last half-hour return. 2015.

You can find the .pdf file of the paper on the SSRN website.

Hope this helps.

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