Hello Quantopian Community,
goal of my research is to build a strategy/algorithm of another market imperfection, namely the "late morning weakness".
According to Admati, Anat and Paul Pfleiderer (1988) intraday pattern occur as a result of strategic behaviour. So what is the late morning weakness?
Research objective is to identify a situation in the morning around 10 am, when the market, after trending bullish at opening, diminishes it gains (coffee break hypothesis).
First i start to analyze the SPY from 2013/01 - 2015/11 using minute data. Briefly what i did is following:
- creating a loop from 9:30 - 1 o clock and normalize the price path to 1.
- Building average chart with top and bottom percentile lines
- Volume analysis (profile by daytime)
- Test for days
The main insight so far is that the effect occurs around 11:30 am on average. On Tuesdays there is a major decline around 11:30 am as well. The volume analysis implies a high volume at the beginning of the day.
Im glad to hear your response and many thanks to those who have good ideas :)
Further steps would be applying more filters and finding out under conditions under which the effect occurs. Its very interesting to do a backtest and see how it performs. Thank you for any Help!