Last hour momentum in the Chinese stock market

Yang, Lu

doi:10.1108/cfri-06-2021-0106

Cited by 2 publications

(3 citation statements)

References 55 publications

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“…It is not surprising to find that the largest 1‐min variance for a trading day occurs when the market opens, as this variance reflects the opening price reaction to information accumulated overnight from futures markets and overseas stock markets. The figure shows that a standard U‐shaped pattern exists (Hong & Wang, 2000; Yang, 2022). The closing variances, although tending to be higher than those earlier in the day, are not so dramatic as the opening variances.…”

Section: Introductionmentioning

confidence: 99%

Option pricing with overnight and intraday volatility

Fang

Huang

2023

Journal of Futures Markets

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Efficiently exploiting the volatility information contained in price variations is important for pricing options and other derivatives. In this study, we develop a new and flexible option‐pricing model that explicitly specifies the joint dynamics of overnight and intraday returns. The application of multivariate Edgeworth–Sargan density enables us to derive analytical approximations for option valuation formulas. Empirically, the model improves significantly upon benchmark models using S&P 500 index options. In particular, its separate modeling of intraday and overnight return volatility leads to an out‐of‐sample gain of 7.24% in pricing accuracy compared with the modeling of the close‐to‐close return volatility as a whole. The improvements are more pronounced during highly volatile periods.

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Section: Introductionmentioning

confidence: 99%

Option pricing with overnight and intraday volatility

Fang

Huang

2023

Journal of Futures Markets

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“…Other research groups uncover a strong market intraday time-series momentum everywhere (Baltussen et al ., 2021) in both the Chinese stock market (Gao et al ., 2019) and global markets (Li et al ., 2022). For example, Yang (2022) captures the last-hour momentum over the intraday session and develops a trading strategy for the exchange-traded fund (ETF), which generates an annualized excess return of 9.673%. Moreover, negative trading day reversals after a higher frequency of positive overnight return momentum during a month suggest a more intense daily tug-of-war between opposing investor clientele (Akbas et al ., 2022).…”

Section: Introductionmentioning

confidence: 99%

“…This paper contributes to several current literature frontiers, such as intraday momentum, reversal and interaction in social finance. However, the main contribution is to reply to the underlying coherent behavior in a new unified paradigm [6] in which traders' momentum (Xu, 2016; Gao et al ., 2018; Yang, 2022), reversal (Wang et al ., 2011; Barardehi et al ., 2022) and interactive behaviors (Shi et al ., 2021; Liang et al ., 2022) play roles in intraday dynamic market equilibrium without imposing the invariance criterion of rational choice (Kahneman and Tversky, 1984; Sunstein et al ., 2001). It uncovers subjects' intelligent, interactively coherent behaviors in social finance (Hirshleifer, 2020), which contrast rationally consistent preferences in standard economic textbooks today (Mas-Colell et al.…”

Section: Introductionmentioning

confidence: 99%

The underlying coherent behavior in intraday dynamic market equilibrium

Shi

Guo

Fenu

et al. 2023

CFRI

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PurposeThis paper applies a volume-price probability wave differential equation to propose a conceptual theory and has innovative behavioral interpretations of intraday dynamic market equilibrium price, in which traders' momentum, reversal and interactive behaviors play roles.Design/methodology/approachThe authors select intraday cumulative trading volume distribution over price as revealed preferences. An equilibrium price is a price at which the corresponding cumulative trading volume achieves the maximum value. Based on the existence of the equilibrium in social finance, the authors propose a testable interacting traders' preference hypothesis without imposing the invariance criterion of rational choices. Interactively coherent preferences signify the choices subject to interactive invariance over price.FindingsThe authors find that interactive trading choices generate a constant frequency over price and intraday dynamic market equilibrium in a tug-of-war between momentum and reversal traders. The authors explain the market equilibrium through interactive, momentum and reversal traders. The intelligent interactive trading preferences are coherent and account for local dynamic market equilibrium, holistic dynamic market disequilibrium and the nonlinear and non-monotone V-shaped probability of selling over profit (BH curves).Research limitations/implicationsThe authors will understand investors' behaviors and dynamic markets through more empirical execution in the future, suggesting a unified theory available in social finance.Practical implicationsThe authors can apply the subjects' intelligent behaviors to artificial intelligence (AI), deep learning and financial technology.Social implicationsUnderstanding the behavior of interacting individuals or units will help social risk management beyond the frontiers of the financial market, such as governance in an organization, social violence in a country and COVID-19 pandemics worldwide.Originality/valueIt uncovers subjects' intelligent interactively trading behaviors.

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Last hour momentum in the Chinese stock market

Cited by 2 publications

References 55 publications

Option pricing with overnight and intraday volatility

Option pricing with overnight and intraday volatility

The underlying coherent behavior in intraday dynamic market equilibrium

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