Posts Tagged ‘trading day


Video: Bitcoin, Crash en tiempo real

(Fuente: Marginal Revolution)


Paper: Correlación y el SPY

Intraday Correlation Patterns between the S&P 500 and Sector Indices

In this brief research note, I explore recent patterns in intraday return and volume correlation between the S\&P 500 and sector indices, as represented by minutely data from Aug. 23 to Sep. 10 for the SPDR exchange-traded funds. Notably, there appears to be evidence of two previously unreported patterns in intraday correlation. First, there is a “U-shaped” trend in return correlation, characterized by higher correlation at open and close and lower correlation during mid-day hours. Second, volume correlation is marked by lower values in the morning and increasing values in the afternoon. In some cases, this trend even takes the infamous “hockey-stick” shape, exhibiting stable values in the morning but sharply increasing values in the late afternoon. To ensure that these patterns are not a function of the choice of correlation window size, I confirm that these patterns are qualitatively stable over correlation windows ranging from 10 minutes to 90 minutes. These findings indicate that non-time-stationary patterns exist not only for volume and volatility, as previously reported, but also for the correlation of return and volume between the market and sector indices. These results have possible implications for intraday market efficiency and for trading strategies that rely on intraday time-stationarity of return or volume correlation.

Link al Paper


Paper: El efecto de los activos complejos

Trading Complex Assets

We perform an experimental study of complexity to assess its effect on trading behavior, price volatility, liquidity, and trade efficiency. Subjects were asked to deduce the value of a particular asset from information they were given about the composition and price of several portfolios. Following that, subjects traded with each other anonymously in a well-defined, simple bargaining process. Portfolio problems ranged from requiring simple analysis to more complicated computation. Complexity altered subjects’ bidding strategies, decreased liquidity, increased price volatility, and decreased trade efficiency. Female subjects were affected more by complexity (e.g., lower trade frequency), although they achieved higher payoffs in the complex treatment. Our analysis suggests that complexity may be a driver of volatility and liquidity in financial markets and provides novel testable empirical predictions.

Link al Paper


Sobre HFT, Wilmott palabras mayores…

Llegue de casualidad, via el blog Zero Hedge, a un postescrito por Paul Wilmott– sobre High Frequency Trading y su impacto en la liquidez y en la volatilidad de los mercados (Como diría un profesor de economía que tuve, “¿pero de que mercados me hablan?” cuando exigía claridad en los términos).


I am concerned about High-frequency Trading (HFT) for two main reasons: Reduction of the relationship between value and price; Potential for positive feedback.


But feedback can be positive or negative.

Negative feedback is when an up move in a stock leads to a sell signal, and thus a fall in the price, and a down leads to a buy, and thus a rise in the price. This dampens volatility.

Positive feedback is when an up begets a buy, which causes the stock to rise again, causing another buy, etc. etc. And when a fall begets a sell, causing another fall, and further selling, and…

So which is it? Does HFT result in a reduction of volatility via negative feedback or an increase via positive feedback? This is an easy one. If you are a hedge fund manager which of the following would you prefer? A or B?

A. Low volatility. Shares go up or go down fairly predictably. No skill is required to make money, even by the man on the street. Hedge funds can’t charge large fees.

B. High volatility. Very difficult markets, experts needed and can charge large fees. If a fund does well they make a killing because of the enormous profit they have made for their clients. But they are just as likely to lose all their clients’ money, in which case…nothing bad happens to the fund manager.

Yes, we are in that familiar territory of moral hazard. Of course the funds want to increase volatility and they have found themselves in exactly the place they want to be to make this happen.



las advertencias son ahora mainstream

Las advertencias sobre los ETFs, especialmente los apalancados, se vuelcan ahora en los principales medios; el flash crash ayudo.

Ahora es el turno de The Economist.

ETFs also gained popularity because investors can trade them all day long, whereas a mutual fund can be liquidated only at the beginning and end of the trading day. Retail investors, who are thought to make up half the American ETF market, are probably better off holding on to investments rather than day-trading them. And the “flash crash” on May 6th demonstrated that it is not always easy to exit from ETFs. As liquidity disappeared that day, many ETFs traded down nearly to zero.

The events of May 6th may have been exceptional but a period of market volatility is not. That spells danger for investors in leveraged ETFs, which use debt to magnify the returns of the index they follow. Because these ETFs “reset” on a daily basis, they can easily stray from their targets. If an index worth $100 drops 10% one day and gains 10% the next, it is worth $99, a loss of $1. You might assume that a fund leveraged to deliver twice the returns of this index would be worth $98, a loss of $2. In fact, an ETF of this sort would be worth $80 on the first day and $96 on the second day, for a loss of $4. Whether retail investors understand this is not clear.


Paper: patrones, retornos, y acciones

Are You Trading Predictably?

Over the post-decimalization period, we find a predictable pattern of return continuation in equities. Stocks whose relative returns are high in a given half-hour interval today tend to exhibit similar outperformance in the same half-hour period on subsequent days. The effect is stronger at the beginning and end of the trading day, but exists throughout the day. Percentage changes in trading volume exhibit a similar pattern, but do not explain the return pattern. These results suggest that strategically shifting the timing of trades can significantly reduce execution costs for institutional traders.

Link al Paper


Paper: timing para operar

Paying Attention: Overnight Returns and the Hidden Cost of Buying at the Open

Using 13 years of intraday data for U.S. stocks, we find a strong tendency for positive returns during the overnight period followed by reversals during the trading day. This behavior is driven by an opening price that is high relative to intraday prices. We find this temporary price inflation at the open is concentrated among stocks that have recently attracted the attention of retail investors, and these high attention stocks have high levels of net retail buying at the start of the trading day. In addition, we document that the sensitivity of opening prices to retail investor attention is more pronounced for stocks that are difficult to value and costly to arbitrage, and is greater during periods of high retail investor sentiment. The additional implicit transaction costs for retail traders who buy high attention stocks near the open frequently exceed the effective half spread.

Link al Paper

Fun & Finance


Fun & Finance Rollover

"It is hard to be finite upon an infinite subject, and all subjects are infinite." Herman Melville

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April 2020



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