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Intra-day Patterns in the Returns, Bidask Spereads, and Trading Volume of Stocks Traded on the New York Stock Exchange

  • Chris Brooks

    ()

    (ICMA Centre, University of Reading)

  • Melvin. J. Hinich

    (University of Texas at Austin)

  • Douglas M. Patterson

    (Virginia Tech)

Much research has demonstrated the existence of patterns in high-frequency equity returns, return volatility, bid-ask spreads and trading volume. In this paper, we employ a new test for detecting periodicities based on a signal coherence function. The technique is applied to the returns, bid-ask spreads, and trading volume of thirty stocks traded on the NYSE. We are able to confirm previous findings of an inverse J-shaped pattern in spreads and volume through the day. We also demonstrate that such intraday effects dominate day of the week seasonalities in spreads and volumes, while there are virtually no significant periodicities in the returns data. Our approach can also leads to a natural method for forecasting the time series, and we find that, particularly in the case of the volume series, the predictions are considerably more accurate than those from naïve methods.

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Paper provided by Henley Business School, Reading University in its series ICMA Centre Discussion Papers in Finance with number icma-dp2003-14.

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Length: 30 pages
Date of creation: Oct 2003
Date of revision:
Handle: RePEc:rdg:icmadp:icma-dp2003-14
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Web page: http://www.henley.reading.ac.uk/

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  1. Upson, Roger B., 1972. "Random Walk and Forward Exchange Rates: A Spectral Analysis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(04), pages 1897-1905, September.
  2. Keim, Donald B & Stambaugh, Robert F, 1984. " A Further Investigation of the Weekend Effect in Stock Returns," Journal of Finance, American Finance Association, vol. 39(3), pages 819-35, July.
  3. Foster, F Douglas & Viswanathan, S, 1993. " Variations in Trading Volume, Return Volatility, and Trading Costs: Evidence on Recent Price Formation Models," Journal of Finance, American Finance Association, vol. 48(1), pages 187-211, March.
  4. Durlauf, Steven N., 1991. "Spectral based testing of the martingale hypothesis," Journal of Econometrics, Elsevier, vol. 50(3), pages 355-376, December.
  5. Rogalski, Richard J, 1984. " New Findings Regarding Day-of-the-Week Returns over Trading and Non-trading Periods: A Note," Journal of Finance, American Finance Association, vol. 39(5), pages 1603-14, December.
  6. Rogalski, Richard J, 1984. " A Further Investigation of the Weekend Effect in Stock Returns," Journal of Finance, American Finance Association, vol. 39(3), pages 835-37, July.
  7. French, Kenneth R., 1980. "Stock returns and the weekend effect," Journal of Financial Economics, Elsevier, vol. 8(1), pages 55-69, March.
  8. Chan, K C & Christie, William G & Schultz, Paul H, 1995. "Market Structure and the Intraday Pattern of Bid-Ask Spreads for NASDAQ Securities," The Journal of Business, University of Chicago Press, vol. 68(1), pages 35-60, January.
  9. Jain, Prem C. & Joh, Gun-Ho, 1988. "The Dependence between Hourly Prices and Trading Volume," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(03), pages 269-283, September.
  10. Yadav, Pradeep K. & Pope, Peter F., 1992. "Intraweek and intraday seasonalities in stock market risk premia: Cash and futures," Journal of Banking & Finance, Elsevier, vol. 16(1), pages 233-270, February.
  11. Bertoneche, Marc L., 1979. "Spectral analysis of stock market prices," Journal of Banking & Finance, Elsevier, vol. 3(2), pages 201-208, July.
  12. Hilliard, Jimmy E, 1979. "The Relationship between Equity Indices on World Exchanges," Journal of Finance, American Finance Association, vol. 34(1), pages 103-14, March.
  13. Fong, Wai Mun & Ouliaris, Sam, 1995. "Spectral Tests of the Martingale Hypothesis for Exchange Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(3), pages 255-71, July-Sept.
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