Auction and Closing-Period Volume Share as Equity Selection Factors
Summary
This factor study examines whether the share of a stock’s trading volume occurring in the opening call auction contains information useful for equity selection. It builds an opening call-auction volume proportion factor from relative volume and moving averages, then adjusts it with time-varying weights to reflect information decay. The proposed interpretation is that auction volume reflects investor attention and agreement about an opening price.
The study adds the share of volume traded in the final five minutes to form a weighted composite factor. It reports information coefficients and information ratios for the opening and composite factors, plus a long-short portfolio test based on five groups over an eight-year period. The composite is reported to improve predictive performance, and the factor retains signal after neutralization for volatility, size, momentum, and industry. These are historical model results; the document warns that the tests may not persist and provides no guarantee of future performance.
Key ideas
- Opening call-auction volume share is used as a high-frequency equity selection factor.
- The opening factor uses moving averages and time-varying weights to account for information decay.
- A composite factor adds volume share from the final five minutes of trading.
- The document reports historical factor and portfolio results, including after neutralization, but warns that the model may fail.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.