Industry Momentum - Vertical Cut: Intraday and Overnight Return Momentum
factor.formula
Intraday Return:
Overnight Return:
Intraday Momentum Factor:
Overnight Momentum Factor:
in:
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The intraday rate of return on the tth trading day represents the change in the closing price relative to the opening price on that trading day.
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The overnight return rate on the tth trading day represents the change in the opening price of the trading day relative to the closing price of the previous trading day.
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The closing price on the tth trading day is the price of the last transaction on that trading day.
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The opening price on the tth trading day is the price of the earliest transaction on that trading day.
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The closing price of the t-1th trading day, that is, the last transaction price of the previous trading day.
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The intraday momentum factor is the sum of the intraday returns over the past 20 trading days.
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The overnight momentum factor is the sum of the overnight returns over the past 20 trading days.
factor.explanation
Empirical studies have shown that the intraday momentum factor tends to show a momentum effect, that is, industries with higher factor values are more likely to obtain excess returns in the short term in the future, and vice versa. This reflects the possible high-flying and low-sell behavior of market participants in intraday trading. The overnight momentum factor, on the other hand, tends to show a reversal effect, that is, industries with higher factor values are more likely to perform poorly in the short term in the future, which may be related to the market's reaction to overnight news and the adjustment of opening prices. Therefore, when constructing an investment portfolio, you can consider using the characteristics of these two factors in combination to construct a long-short strategy to improve the risk-adjusted return of the investment portfolio.