Daily distribution of Swedish OMX-index returns over intraday-to-intraday time intervals
AbstractThis paper examines the intradaily behaviour of the Swedish OMX stock index during the time period January 02 to December 30 1992. Daily 24-hour returns are calculated in 18 different time intervals during the day: open-to-open, intraday- to-intraday and close-to-close. Evidence of different OMX-return generating distributions is found. It is most striking when the distributions from the beginning and the end of the day are compared with the distributions terminating during the middle of the day. The evidence of differences in the variances and autocorrelations is supported by robust significance tests within a simplified setting of the Generalized Method of Moments (GMM) estimation. The variances show a V-shaped pattern when they are plotted against the terminal time of the returns as international studies also have shown, whereas the autocorrelations behave almost in an opposite fashion, which is inconsistent with previous research. Since the series of interval returns are exposed to the same flow of information the differences must be due to microstructure effects. The friction in the market prices seems to be more severe at the beginning and at the end of the trading day than at times in between. This implies that there is comparatively more noise in the pricing process just after the opening and prior to the closing of the exchange.
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Bibliographic InfoArticle provided by Finnish Economic Association in its journal Finnish Economic Papers.
Volume (Year): 7 (1994)
Issue (Month): 1 (Spring)
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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- Hawawini, Gabriel & Cohen, Kalman & Maier, Steven & Schwartz, Robert & Whitcomb, David, 1980. "Implications of microstructure theory for empirical research in stock price behavior," MPRA Paper 33976, University Library of Munich, Germany.
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- Amihud, Yakov & Mendelson, Haim, 1991. " Volatility, Efficiency, and Trading: Evidence from the Japanese Stock Market," Journal of Finance, American Finance Association, vol. 46(5), pages 1765-89, December.
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