Advanced Search
MyIDEAS: Login to save this paper or follow this series

Intraday Anomalies and Market Efficiency: A Trading Robot Analysis

Contents:

Author Info

  • Guglielmo Maria Caporale
  • Luis Gil-Alana
  • Alex Plastun
  • Inna Makarenko

Abstract

One of the leading criticisms of the Efficient Market Hypothesis (EMH) is the presence of so-called "anomalies", i.e. empirical evidence of abnormal behaviour of asset prices which is inconsistent with market efficiency. However, most studies do not take into account transaction costs. Their existence implies that in fact traders might not be able to make abnormal profits. This paper examines whether or not anomalies such as intraday or time of the day effects give rise to exploitable profit opportunities by replicating the actions of traders. Specifically, the analysis is based on a trading robot which simulates their behaviour, and incorporates variable transaction costs (spreads). The results suggest that trading strategies aimed at exploiting daily patterns do not generate extra profits. Further, there are no significant differences between sub-periods (2005-2006 - "normal" , 2007- 2009 - "crisis" , 2010-2011 - "post-crisis).

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.461601.de/dp1377.pdf
Download Restriction: no

Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1377.

as in new window
Length: 20 p.
Date of creation: 2014
Date of revision:
Handle: RePEc:diw:diwwpp:dp1377

Contact details of provider:
Postal: Mohrenstraße 58, D-10117 Berlin
Phone: xx49-30-89789-0
Fax: xx49-30-89789-200
Email:
Web page: http://www.diw.de/en
More information through EDIRC

Related research

Keywords: Efficient Market Hypothesis; intraday patterns; time of the day anomaly; trading strategy;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Harris, Lawrence, 1986. "A transaction data study of weekly and intradaily patterns in stock returns," Journal of Financial Economics, Elsevier, Elsevier, vol. 16(1), pages 99-117, May.
  2. Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
  3. CORONEO, Laura & VEREDAS, David, 2006. "Intradaily seasonality of returns distribution. A quantile regression approach and intradaily VaR estimation," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2006077, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. A Abhyankar & D Ghosh & E Levin & R J Limmack, 1995. "Bid-Ask Spreads, Trading Volume and Volatility: Intraday Evidence from the London Stock Exchange," Working Papers Series, University of Stirling, Division of Economics 95/11, University of Stirling, Division of Economics.
  5. Jensen, Michael C., 1978. "Some anomalous evidence regarding market efficiency," Journal of Financial Economics, Elsevier, Elsevier, vol. 6(2-3), pages 95-101.
  6. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, American Economic Association, vol. 70(3), pages 393-408, June.
  7. Pawel STRAWINSKI & Robert SLEPACZUK, 2008. "Analysis Of High Frequency Data On The Warsaw Stock Exchange In The Context Of Efficient Market Hypothesis," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(3(5)_Fall), pages 306-319.
  8. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, American Finance Association, vol. 25(2), pages 383-417, May.
  9. Harris, Lawrence, 1989. "A Day-End Transaction Price Anomaly," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 24(01), pages 29-45, March.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:diw:diwwpp:dp1377. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bibliothek).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.