Advances in systematic investing have made it possible to benefit from intraday trends market fluctuations during the trading session. Due to their defensive profiles, intraday trend-following strategies can be an interesting complement to equity and multi-asset portfolios. This study reviews the empirical and theoretical evidence about intraday trends and the factors that drive them.
Recent academic literature discusses the rationale for following trends just before the market closes, based on overnight returns. The study published by the QIS Lab is the first of its kind as it focuses on trends that may arise in major equity indices throughout the whole trading session. Using machine learning techniques, the authors provide new evidence on intraday patterns around the clock. They also identify the fundamental and technical factors that drive intraday trends based on extensive review of the literature on intraday returns and an extensive empirical investigation.
Intraday trend strategies are now part and parcel of modern portfolio management. The study by the QIS Lab shows that these new strategies usefully complement defensive assets in order to mitigate tail risk and protect the long-term returns of a portfolio.
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