Comparing Intraday and Daily Returns Across Futures Exchanges

Summary

The document describes a comparison of gold futures traded on two exchanges with different trading hours. One market is open for eight hours, while the other trades for sixteen hours; their sessions overlap and close together. The author observes that summing hourly returns produces a larger total for the longer session, even though the exchanges show the same close-to-close daily return.

The question highlights an important measurement issue: intraday return sums depend on the sampling window and session definition, so they should not be compared as if they were equivalent daily observations. Annualization also needs care. Multiplying a daily return by the square root of the number of trading days is a volatility convention, not a general way to annualize mean returns. The document offers no calculations or answer resolving the discrepancy, and it does not specify the precise return construction, timestamp alignment, or annualization target. Its value is in surfacing these choices rather than prescribing a complete method.

Key ideas

• The two gold futures exchanges have different session lengths despite overlapping trading hours.
• Summed hourly returns can differ even when close-to-close daily returns match.
• Return comparisons require consistent session boundaries and sampling conventions.
• Square-root-of-time scaling is generally associated with volatility, not mean return annualization.
• The document poses the problem but supplies no worked resolution.

Tags

# Calculating Asset Returns


# Calculating Asset Returns












The question pertains to a simple phenomenon. There is gold futures listed on Exchange A and Exchange B. Exchange A and Exchange B overlap times with A and B starting 8 hours later and A and B closing together. On Exchange A, it trades for 8 hours. On Exchange B, it trades for 16 hours.

I calculate hourly returns for both exchanges. Since this is Gold Futures, they are highly correlated.

Thus Sum of hourly returns on B is greater than Sum of hourly returns on A. However Daily returns of Close-Close of both A and B are same.

If i extrapolate Daily returns to Annually, then sqrt(252)* Daily Returns shall give us the Annualized Returns.

How do i resolve the hourly and daily returns dilemma?

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.