Hedging Demand and Market Intraday Momentum

Guido Baltussen*, Z Da, S Lammers, MPE Martens

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

5 Citations (Scopus)
32 Downloads (Pure)

Abstract

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.

Original languageEnglish
JournalJournal of Financial Economics
DOIs
Publication statusPublished - Oct 2021

Bibliographical note

Publisher Copyright:
© 2021

Fingerprint

Dive into the research topics of 'Hedging Demand and Market Intraday Momentum'. Together they form a unique fingerprint.

Cite this