Intraday patterns in the cross-sectional of stock returns: Dow Jones Industrial Average (DJIA) and National Association of Securities Dealers Automated Quotations (NASDAQ) high frequency indexes

This paper examines the behavior of intra-day periodicity by dividing the trading day into 39 and 10 min trading intervals for both the Dow Jones and NASDAQ markets. Using a high frequency data of 10 min stock index over the period of August 1, 1997 to June 19, 2007, which included 2,485 trading days with 96,915 intraday observations, we found that the current return today has a positive and explanatory impact on the return at the same time tomorrow. Results of this study are in line with the reports by Heston et al. (2010) who use diversified individual common stocks rather than stock indexes, implying the negative autocorrelation induced by bid-ask bounce and lack of resiliency in both DJIA and NASDAQ markets as well. Although, there is a significant positive relation between a stockʹs return over an interval and its subsequent returns at daily frequencies, this effect is found significant for only one day for DJIA, whereas up to around five trading days for NASDAQ. No significant size effect differences were found between both market traders and neither was intraday patterns changed after the event of 911 shocks.