Investor clientele and intraday patterns in the cross section of stock returns

Chen, Jian; Haboub, Ahmad; Khan, Ali; Mahmud, Syed

Abstract

This paper examines the existence of a well documented (Heston et al. in J Finance 65:1369–1407) (hereafter HKS 2010) intraday momentum pattern in the cross section of stock returns for three previously un-examined markets outside the US—UK, China and Brazil. While the stocks in UK and Brazil exhibit the pattern, the evidence from China is lacklustre. We utlitlize the presence of dual listed A-shares (dominated by domestic retail investors) and their B- and H-share counterparts (dominated by foreign institutional investors) of the same firms which provide a natural experiment setting to analyse the impact of investor clientele on the proliferation of HKS (2010) pattern. Our findings indicate that pattern is much weaker in A-shares (owned mostly by domestic retail investors) as compared to their B- and H-share counterparts. As a further robustness test we examine the impact of an exogenous shock that leads to an increase in institutional ownership namely the partial index inclusion of A-shares in the Morgan Stanley Capital International (MSCI) Emerging Markets Index. Our findings indicate an increasing level of the manifestation of the intraday pattern upon inclusion of A-shares to the MSCI.

Citation

Chen, J., Haboub, A., Khan, A., & Mahmud, S. (2024). Investor clientele and intraday patterns in the cross section of stock returns. Review of Quantitative Finance and Accounting, https://doi.org/10.1007/s11156-024-01319-8

• Journal Article Type: Article
• Acceptance Date: Jun 20, 2024
• Online Publication Date: Jul 29, 2024
• Publication Date: Jul 29, 2024
• Deposit Date: Aug 9, 2024
• Publicly Available Date: Aug 12, 2024
• Print ISSN: 0924-865X
• Electronic ISSN: 1573-7179
• Publisher: Springer Verlag
• Peer Reviewed: Peer Reviewed
• DOI: https://doi.org/10.1007/s11156-024-01319-8
• Public URL: https://nottingham-repository.worktribe.com/output/38117222
• Publisher URL: https://link.springer.com/article/10.1007/s11156-024-01319-8