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Intraday patterns in London listed Exchange Traded Funds

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  • Chelley-Steeley, Patricia
  • Park, Keebong
Abstract
In this paper we examine the intraday trading patterns of Exchange Traded Funds (ETFs) listed on the London Stock Exchange. ETFs have been shown to be characterised by much lower bid–ask spread costs and by lower levels of information asymmetry than individual securities. One possible explanation for intraday trading patterns is that concentration of trading arises at the start of the trading day because informed traders have private information that quickly diminishes in value as trading progresses. Since ETFs have lower trading costs and lower levels of information asymmetry we would expect these securities to display less pronounced intraday patterns than individual securities. We fail to find that ETFs are characterised by concentrated trading bouts during the day and therefore find support for the argument that information asymmetry is the cause of intraday volume patterns in stock markets. We find that ETF bid–ask spreads and volatility are elevated at the open but not at the close. This lends support to the “accumulation of information” explanation that sees high spreads and volatility at the open as a consequence of information accumulating during a market closure and impacting on the market when it next opens.

Suggested Citation

  • Chelley-Steeley, Patricia & Park, Keebong, 2011. "Intraday patterns in London listed Exchange Traded Funds," International Review of Financial Analysis, Elsevier, vol. 20(5), pages 244-251.
    • Handle: RePEc:eee:finana:v:20:y:2011:i:5:p:244-251
    DOI: 10.1016/j.irfa.2011.05.001
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    3. Azhar Mohamad & Aziz Jaafar & John Goddard, 2016. "Short selling and exchange-traded funds returns: evidence from the London Stock Exchange," Applied Economics, Taylor & Francis Journals, vol. 48(2), pages 152-164, January.
    4. Li, Wenhui & Zhu, Qi & Wen, Fenghua & Nor, Normaziah Mohd, 2022. "The evolution of day-of-the-week and the implications in crude oil market," Energy Economics, Elsevier, vol. 106(C).
    5. Bassiouny, Aliaa & Tooma, Eskandar, 2021. "Intraday indirect arbitrage between European index ETFs," International Review of Financial Analysis, Elsevier, vol. 75(C).
    6. Ben Ammar, Imen & Hellara, Slaheddine & Ghadhab, Imen, 2020. "High-frequency trading and stock liquidity: An intraday analysis," Research in International Business and Finance, Elsevier, vol. 53(C).
    7. Tseng, Tseng-Chan & Lee, Chien-Chiang & Chen, Mei-Ping, 2015. "Volatility forecast of country ETF: The sequential information arrival hypothesis," Economic Modelling, Elsevier, vol. 47(C), pages 228-234.
    8. Jakub Kubiczek & Marcin Tuszkiewicz, 2022. "Intraday Patterns of Liquidity on the Warsaw Stock Exchange before and after the Outbreak of the COVID-19 Pandemic," IJFS, MDPI, vol. 10(1), pages 1-16, February.

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