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Intraday return predictability: Evidence from commodity ETFs and their related volatility indices

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  • Xu, Yahua
  • Bouri, Elie
  • Saeed, Tareq
  • Wen, Zhuzhu

Abstract

Using high-frequency data of crude oil, gold, and silver exchange-traded funds (ETFs) and their related volatility indices, we analyse patterns of intraday return predictability, also called intraday momentum, in each market. We find that intraday return predictability exists in all the markets, but the patterns of predictability differ for each market, with different half-hour returns, not necessarily the first half-hour returns of the trading day, exhibiting significant predictability for their last half-hour counterparts, depending on the specific market. The intraday return predictability is stronger on days of higher volatility and larger jumps. Substantial economic value can be generated by a market timing strategy which is constructed upon the intraday momentum, in all the markets under study. Possible theoretical explanations for the intraday return predictability are infrequent portfolio rebalancing investors and late-informed investors.

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  • Xu, Yahua & Bouri, Elie & Saeed, Tareq & Wen, Zhuzhu, 2020. "Intraday return predictability: Evidence from commodity ETFs and their related volatility indices," Resources Policy, Elsevier, vol. 69(C).
    • Handle: RePEc:eee:jrpoli:v:69:y:2020:i:c:s030142072030862x
    DOI: 10.1016/j.resourpol.2020.101830
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    Cited by:

    1. Naeem, Muhammad Abubakr & Peng, Zhe & Bouri, Elie & Hussain Shahzad, Syed Jawad & Karim, Sitara, 2022. "Examining the asymmetries between equity and commodity ETFs during COVID-19," Resources Policy, Elsevier, vol. 79(C).
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    3. Borgards, Oliver & Czudaj, Robert L. & Hoang, Thi Hong Van, 2021. "Price overreactions in the commodity futures market: An intraday analysis of the Covid-19 pandemic impact," Resources Policy, Elsevier, vol. 71(C).

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    More about this item

    Keywords

    Intraday return predictability; Commodity ETFs; Commodity volatility indices; Market timing strategy;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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