ERN: Asset Pricing Models (Topic) | 2021

Hedging Demand and Market Intraday Momentum



edging 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 document strong “marketintraday momentum” everywhere. The return during the last 30 minutes before the marketclose is positively predicted by the return during the rest of the day (from previous marketclose to the last 30 minutes). The predictive power is economically and statistically highlysignificant, and reverts over the next days. We provide novel evidence that links marketintraday momentum to the gamma hedging demand from market participants such as marketmakers of options and leveraged ETFs.

Volume None
Pages None
DOI 10.2139/ssrn.3760365
Language English
Journal ERN: Asset Pricing Models (Topic)

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