Dec
31
Futures Volatility on the Hour, from Kim Zussman
December 31, 2007 |
Just as many traders could be attracted to trading at round numbers, so might they be inclined to open or close trades at or near the clock-hour mark. It seems possible that increased trading on the hour could effect volatility. As a check on this, looked at range in the 10 minutes centered on each clock hour (ES 1/07-12/07), and compared with the 10 minutes prior (which was not on the hour).
Range in this case defined as [max(high)] - [min(low)] within the period +/- 5 minutes of the hour for continuous futures prices. Used paired t-test to compare the peri-hour range to the range of 10 min prior (adjusting for local market volatility by comparing to adjacent range, tests whether difference is not zero). This test showed no difference between on the hour and pre-hour range:
An additional test comparing variance of hour range and pre hour range showed no difference:
OK, that was boring. However it was interesting to compare mean range (around the hour) for the different hours of the day-session. The mean range was significantly higher at 10:00 NY time, and lower at 12:00 and 13:00, than the global mean range.
Jim Sogi adds:
Financial Markets Tick by Tick, edited by Pierre Lequeux, has some studies of this nature on various markets which are in the same vein. Mornings and closes have the highest volumes and volatility, with midday being lower on both measures.
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