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The predictability of opening returns for the returns of the trading day: Evidence from Taiwan futures market

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  • Chen, Chun-nan

Abstract

This study provides evidence for the predictive power of the open-period returns for the returns of the rest of the trading day. Using the first two consecutive 5-minute periods after the opening as observation points from which to determine the trading direction, this study examines whether the effect of open-period intraday cumulative index futures returns can persist toward the close of the market. The strategy is tested using intraday data of Taiwan Stock Index Futures (TX) over the 2001–2006 period. The results consistently show that the opening return can predict the return of the trading day and the trading strategy based on the opening return is profitable even after considering transaction costs. The results are robust to uses of different index futures.

Suggested Citation

  • Chen, Chun-nan, 2013. "The predictability of opening returns for the returns of the trading day: Evidence from Taiwan futures market," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 272-281.
    • Handle: RePEc:eee:reveco:v:25:y:2013:i:c:p:272-281
    DOI: 10.1016/j.iref.2012.07.012
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    3. Semenov, Andrei, 2015. "The small-cap effect in the predictability of individual stock returns," International Review of Economics & Finance, Elsevier, vol. 38(C), pages 178-197.
    4. Miwa, Kotaro, 2019. "Trading hours extension and intraday price behavior," International Review of Economics & Finance, Elsevier, vol. 64(C), pages 572-585.

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    More about this item

    Keywords

    Intraday return predictability; Index returns; Futures market;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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