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They Still Haven't Told You

arxiv.org

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Re: They Still Haven't Told You

#71

Post by galaxyLogic »

Centigonal wrote: post #67
galaxyLogic wrote: post #60

Earlier quoted context omitted.

If they sell later in the day that should bring the price down. How does that increase the value of the stock overnight?

The paper asserts that, if you buy an amount of stock in the morning, that moves the price up more than selling the same amount of stock in the afternoon moves the price down. To back up this assertion, the paper cites one of the author's previous publications from 2018, which in turn cites this WSJ article: https://www.wsj.com/articles/early-birds-suffer-in-market-14...

Thanks for the explanation. I looked at the WSJ link and it seems to be saying that volatility is higher in the morning than in the afternoon. That makes sense since in the morning it is less certain how the markets will go today whereas before the closing bell we have seen the market behave for 6 hours or so.

And if you trade when volatility is high you could think it has a bigger effect on the market than if you trade when volatility is low, because in a volatile environment other traders are more likely to react abruptly to any change.

But this only works if your trades are big enough to be noticed by other traders.

It all makes sense to me now. And it makes sense that big traders who think this is the case would try to take advantage of it (I don't think it can be made illegal, or is it already?).

Therefore we can assume that prices are artificially high in the morning, and so it makes sense for us small guys to sell in the morning, buy before the close -- if you are a small investor. The big guys will of course do the opposite, to accomplish their market-manipulation.

Re: They Still Haven't Told You

#73

Post by popemarijuanaxv »

Centigonal wrote: post #47

This is a really poor use of the arXiv. Here's a discussion of the same phenomenon that provides some explanations that aren't "a shadowy trading firm is propping up prices by painting the tape at open": https://systematicindividualinvestor.com/2021/01/15/the-magi... To be honest, the author's strategy could really be happening: some market player (or players) may be aggressively buying up stocks at open and selling…

It is not ridiculous if the data is longitudinally consistent.

Re: They Still Haven't Told You

#74

Post by ksdale »

yobbo wrote: post #66
ksdale wrote: post #2

Seems to me like an easy explanation is that a whole ton of firms wouldn't want to hold anything overnight because you can't respond to it until the next morning? So they pile in in the morning, and exit in the afternoon.

No, since expected intraday gains are negative, this would be a losing strategy. Closing price seems to be lower than opening price on average. The suggested explanation is: buy orders are placed before open, raising opening price. The gains on the holdings are then larger than the cost of buying in the opening, and selling during the day.

The market goes down during the day, that isn't the same thing as everyone losing money during the day. On net, all of the market participants lose money, but this is still consistent with sophisticated financial firms making money off of trading with big actors who are less price sensitive and retail traders.

Re: They Still Haven't Told You

#75

Post by kordlessagain »

_2d30 wrote: post #8
ksdale wrote: post #2

Seems to me like an easy explanation is that a whole ton of firms wouldn't want to hold anything overnight because you can't respond to it until the next morning? So they pile in in the morning, and exit in the afternoon.

You clearly didn't read the abstract. There's obviously a conspiracy and if any of this is news to you, it is because the people you trust to alert you to such problems still haven’t told you. Only Bruce knows the truth!!! /s

Please properly open your sarcasm with a tag before closing it because my AI now thinks everything is a conspiracy.

Re: They Still Haven't Told You

#76

Post by amon22 »

Centigonal wrote: post #47

This is a really poor use of the arXiv. Here's a discussion of the same phenomenon that provides some explanations that aren't "a shadowy trading firm is propping up prices by painting the tape at open": https://systematicindividualinvestor.com/2021/01/15/the-magi... To be honest, the author's strategy could really be happening: some market player (or players) may be aggressively buying up stocks at open and selling…

But that's illegal. It's market making.
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