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Day trading returns across volatility states

Author

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  • Lundström, Christian

    (Department of Economics, Umeå School of Business and Economics)

Abstract

This paper measures the returns of a popular day trading strategy, the Opening Range Breakout strategy (ORB), across volatility states. We calculate the average daily returns of the ORB strategy for each volatility state of the underlying asset when applied on long time series of crude oil and S&P 500 futures contracts. We find an average difference in returns between the highest and the lowest volatility state of around 200 basis points per day for crude oil, and of around 150 basis points per day for the S&P 500. This finding suggests that the success in day trading can depend to a large extent on the volatility of the underlying asset.

Suggested Citation

  • Lundström, Christian, 2013. "Day trading returns across volatility states," Umeå Economic Studies 861, Umeå University, Department of Economics, revised 03 Mar 2017.
    • Handle: RePEc:hhs:umnees:0861
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    More about this item

    Keywords

    Contraction-Expansion principle; Futures trading; Opening Range Breakout strategies; Time-varying market inefficiency;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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