TY - JOUR
T1 - Hedging Demand and Market Intraday Momentum
AU - Baltussen, Guido
AU - Da, Z
AU - Lammers, S
AU - Martens, MPE
N1 - Publisher Copyright:
© 2021
PY - 2021/10
Y1 - 2021/10
N2 - Hedging short gamma exposure requires trading in the direction of price movements, thereby creating price momentum. Using intraday returns on over 60 futures on equities, bonds, commodities, and currencies between 1974 and 2020, we find strong market intraday momentum everywhere. The return during the last 30 minutes before the market close is positively predicted by the return during the rest of the day (from previous market close to the last 30 minutes). The predictive power is economically and statistically highly significant, and reverts over the next days. We provide novel evidence that links market intraday momentum to the gamma hedging demand from market participants such as market makers of options and leveraged ETFs.
AB - Hedging short gamma exposure requires trading in the direction of price movements, thereby creating price momentum. Using intraday returns on over 60 futures on equities, bonds, commodities, and currencies between 1974 and 2020, we find strong market intraday momentum everywhere. The return during the last 30 minutes before the market close is positively predicted by the return during the rest of the day (from previous market close to the last 30 minutes). The predictive power is economically and statistically highly significant, and reverts over the next days. We provide novel evidence that links market intraday momentum to the gamma hedging demand from market participants such as market makers of options and leveraged ETFs.
UR - http://www.scopus.com/inward/record.url?scp=85107143502&partnerID=8YFLogxK
U2 - 10.1016/j.jfineco.2021.04.029
DO - 10.1016/j.jfineco.2021.04.029
M3 - Article
SN - 0304-405X
JO - Journal of Financial Economics
JF - Journal of Financial Economics
ER -