The Intra-Day Stock Return Periodicity Puzzle

Authors

Charlotte Haendler, Southern Methodist University (SMU) - Finance DepartmentFollow
Steven L. Heston, University of Maryland - Department of FinanceFollow
Robert A. Korajczyk, Northwestern University - Kellogg School of ManagementFollow
Ronnie Sadka, Boston College - Carroll School of ManagementFollow

Publication Date

11-14-2025

Abstract

Heston et al. (2010) find puzzling intra-day patterns in stock returns, which are particularly strong at the beginning and end of the trading day. We demonstrate the patterns persist out-of-sample and test several explanatory variables, including trading frictions and proxies for trader type. They jointly explain all the open and midday periodicity, and up to 30% of the closing interval periodicity. Our proxies for institutional trading-changes in lendable shares, VWAP-like trading, and index inclusion-are the most significant explanatory variables. Overall, the results suggest that open periodicity is driven by VWAP trading while close periodicity by market-on-close trading.

Document Type

Article

Keywords

Return periodicity, Market Microstructure JEL Codes: G12, Momentum

Disciplines

Finance

Source

SMU Cox: Finance (Topic)

Language

English