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Michael J. Bommarito II

Department of Financial Engineering, University of Michigan, Ann Arbor Department of Political Science, University of Michigan, Ann Arbor Center for the Study of Complex Systems, University of Michigan, Ann Arbor

Abstract In this brief research paper, I explore patterns in intraday return and volume correlation between the S&P 500 and sector indices, as represented by minutely data from Aug. 23 to Oct. 1 for the SPDR exchangetraded funds. Notably, there is evidence of two previously unreported time-of-day eﬀects. First, there is a “U-shaped” pattern in return correlation, characterized by higher correlation at open and close and lower correlation during mid-day hours. Second, volume correlation is marked by lower values in the morning and increasing values in the afternoon. In some cases, this trend even takes the infamous “hockey-stick” shape, exhibiting stable values in the morning but sharply increasing values in the late afternoon. To ensure that these patterns are not a function of the choice of correlation window size, I conﬁrm that these patterns are qualitatively stable over correlation windows ranging from 10 minutes to 90 minutes. These ﬁndings indicate that non-time-stationary patterns exist not only for volume and volatility, as previously reported, but also for the correlation of return and volume between the market and sector indices. These results have possible implications for intraday market eﬃciency and for trading strategies that rely on intraday time-stationarity of return or volume correlation. Keywords: return correlation, volume correlation, intraday correlation, sector correlation

1. Introduction On September 10th, Kristina Peterson of the Wall Street Journal wrote an article asserting what many market participants already felt - market activity has become increasingly concentrated within the ﬁrst and last moments of the day’s trading session ([17]). Though this U-shaped volume phenomenon is not a new ﬁnding, Peterson’s article claims that this U-shape has become more exaggerated recently. I do not attempt to conﬁrm, deny, or explain this claim of an increasingly exaggerated U-shaped volume pattern. Instead, I would like to ask a related question: do intraday patterns exist in the correlation of return or volume within the market? Previous research on time-of-day eﬀects in volume and volatility have provided evidence of varying market eﬃciency in equity, ﬁxed-income, and foreign exchange markets. For example, Wood, McInish, and Ord ﬁnd that the magnitude and standard deviations of NYSE returns are substantially higher in the ﬁrst and last 30 minutes of market sessions ([19]). Jain and Joh also demonstrate that the intraday NYSE volume follows a similar U-shape ([13]). A number of other authors have conﬁrmed these and other results in equity and equity derivative markets ([3, 14, 18, 15]). In the very liquid index futures markets, Chan and Ekman independently conﬁrm that return volatility exhibits a U-shape ([7, 9]). Intraday patterns have likewise been studied in foreign exchange and ﬁxed-income markets by many authors ([4, 8, 2, 16]. Though there are diﬀerences in the type and degree of time-of-day eﬀect, every market has exhibited some intraday pattern.

Email address: mjbommar@umich.edu (Michael J. Bommarito II) Preprint submitted to SSRN October 3, 2010

Electronic copy available at: http://ssrn.com/abstract=1677915

Next. Brockman and Chung identify three existing theories that address at least intraday liquidity patterns ([6]). I write the price of an asset j in period i as Pi. I calculate this trailing correlation coeﬃcient ρA. this dataset contains 28 market sessions. in section 4. XLE. the existence of intraday patterns in market correlation may also indicate varying levels of eﬃciency. From this data. I construct a dataset of minutely closing prices and volumes from August 23rd. proposed by Brock and Kleidon. In the ﬁrst theory. the Select Sector SPDR ETF tracking the technology sector.j . XLI.j ) for i = 1. XLU. In the second theory. Therefore. I describe the dataset constructed for this study and explain the approach for calculating return and volume correlation over varying time scales. . XLV. energy.12 These exchange-traded funds represent some of the most heavily traded securities in the global equity market. Just as U-shaped intraday patterns in volume and volatility suggest varying levels of market eﬃciency. 10. Furthermore. 2010 to October 1st. 938 corresponds to 4:00PM on October 1st. data was obtained from the Power E*Trade Pro trading platform. XLV. The number of shares traded on asset j at period i is likewise written as Vi. Data & Methods In order to investigate intraday patterns. The remainder of this paper is organized as follows: in section 2. then there may be strong evidence of market ineﬃciency. XLE. period i = 1 corresponds to 9:30AM on August 23rd. . diﬀerences are a result of inventory management and the heterogeneity of market participants. I calculate the return matrix R by calculating Ri.Though empirical volume and volatility patterns have been thoroughly investigated. health care. is excluded due to a data issue caused by the author’s mistake. In the third theory. ﬁnancials. From a practical standpoint. do have important possible theoretical implications. XLP.6 billion traded shares and 622 billion dollars of transactions across all 9 assets. A number of author have use these ideas to develop indirect tests of their theories ([1.j = log(Pi+1. there has been comparatively little work on theory to explain these patterns. 2010.938 minutely prices for each asset. however. The results. 937. 2010 and period i = 10. The motivation for this study is certainly empirical. 2010 for the following symbols: SPY. XLB. 2 Electronic copy available at: http://ssrn. . and represents market action of over 8. XLU. liquidity demand is more inelastic at open and close and liquidity suppliers exploit these diﬀerences ([5]). a number of intraday and interday phenomena remain unexplained by any existing theory. SPY corresponds to the S&P 500. XLF. in section 3. 2. XLP. XLB. and consumer discretionary respectively. diﬀerences in the bid-ask spread are a function of time-varying information asymmetries. consumer staples. any strong patterns may serve as a caution to theories or strategies that make assumptions about the dynamics of intraday correlation. I present individual results and demonstrate that the claims in the abstract hold across nearly all time scales and assets. 10]). though they all have some tracking error with respect to their underlying indices.j . As a whole. the combination of their liquidity and tradability makes them best suited for this analysis and the application thereof.com/abstract=1677915 .j ) − log(Pi. XLY. there are many arbitrage strategies whose performance could be improved by incorporating intraday correlation patterns. XLI. I conclude with discussion of these results and provide direction for future work. utilities. and XLY correspond to sector indices for basic materials. Given this data. Formally. . a product of E*TRADE Securities LLC. 10. industrials. If the dependence between two assets exhibits variations that cannot be explain by diﬀerent information processes. I calculate the trailing return correlation and volume correlation between a sector and the S&P 500 for a speciﬁed correlation window τ .B (i) 1 This 2 XLK. However. XLF. For the price and volume matrices.

as it indicates that structural relationships within the market are not stable within the day. It is important to understand that some statements may be true for some values of τ but not others. the ﬁrst τ periods of each session are thrown out so as to not include data from the previous market session. more reliable estimates but take more periods to show real changes in correlation if the underlying parameter varies over time. If a right-side-up U-shape is observed in correlation. R Figure 1 plots the behavior of CXLB for τ = 10 on the left and τ = 60 on the right over the entire time V period of the dataset. In order to detect intraday patterns. The ﬁrst is to note that ρ contains the covariance of the assets in the numerator and the volatility of the assets in its denominator. The result is a matrix of return correlations over time.A ρA. patterns in correlation can be driven both by changes in the actual covariance and/or by changes in the volatility of the assets. These ﬁgures illustrate the importance of τ as described above. but that covariance’s U-shape is at least an order of magnitude greater than volatility’s U-shape. Note that this implies that the ﬁrst hours of the market session may contain fewer samples than later hours. As discussed above.B − µB ) σA σB There are two important points to make with respect to these equations. as this would include jumps from the market close to the next market open. Given this fact. Accordingly. researchers previously uncovered U-shaped intraday patterns in volume and volatility. In the second case. Larger values of τ provide smoother. In the ﬁrst case. 3 . Smaller values of τ are less strong statistically but more responsive to changes in correlation over time.between assets A and B over a window of size τ at period i as 1 µj (i) = τ 2 σj (i) = i Rt. it could be the result of two possible cases. written C V . Cj (i) corresponds to the correlation of returns 3 V between sector j and the S&P 500 at period i. if a U-shaped pattern exists in intraday correlation. Therefore. It is also important to ensure that correlation is only calculated within a day. R and a matrix of volume correlations over time. Larger values of τ yield smoother. these matrices must now be processed to correspond to hours of 3 If i is one of the ﬁrst τ periods of a market session. the covariance between the S&P 500 and sector indices may not be constant and the pattern in covariance may interact directly with any patterns in volatility. Cj (i) likewise corresponds to the correlation of volumes between sector j and the S&P 500 at period i. This can be understood by noting the U-shape of volatility in the denominator of correlation would result either in an upside down U-shape (∩) if covariance were constant or a relatively ﬂat line (−) if covariance’s U-shape is on the same order of magnitude. written C R . In other words. this means that the covariance is not only U-shaped itself. not across sessions.j − µj (i))2 τ − 1 t=i−τ +1 1 τ −1 i t=i−τ +1 (Rt. the existence of a U-shape in correlation should indicate an entirely diﬀerent phenomenon than U-shapes previously noted in volatility. This intraday Ushape in correlation is a much more damning indication of market ineﬃciency than U-shapes in liquidity. τ corresponds to the number of samples used in the correlation calculation and can be thought of as the “memory” of the estimate. The second point to emphasize in these equations is that τ is an important parameter. Figure 2 likewise plots the behavior of CXLB for τ = 10 on the left and τ = 60 on the right over the same interval. Smaller values of τ result in correlation values that are much more dynamic but sometimes harder to interpret. Values may also be coded as N aN in the event that the variance of either the S&P 500 or the sector index is 0 over the current correlation window. more easily understood pictures of correlation but may miss phenomena that occur on small time scales. this value is coded as N aN and is not included in later statistical analysis.B (i) = − µA )(Rt. the covariance of the S&P 500 and sector indices is constant intraday and any non-stationarity is driven by the known non-stationarity in the denominator.j t=i−τ +1 i 1 (Rt.

Results Figure 3 shows the pattern of hourly return correlation (τ = 60) over the day. Each binned hour contains 60 minutes from 28 market sessions. if τ = 30. the 9AM bin contains 0 samples and the 10AM bin now only contains 28 · 30 = 840 samples. yielding 1680 samples per bin. The bars in the ﬁgure give mean standard deviation intervals above and below the mean correlation point.5 0 2000 4000 6000 Period 8000 10000 12000 0. For example.6 −0. averaged across all sector indices.4 0 2000 4000 6000 Period 8000 10000 12000 V Figure 2: Volume correlation between SPY and XLB (CXLB ) for τ = 10 (left) and τ = 60 (right).2 0 −0.4 Correlation Correlation 0. I take the lunch τ period to be one hour on either side of noon.8 0 −0.2 2000 4000 6000 Period 8000 10000 12000 −0.6 0.2 0 2000 4000 6000 Period 8000 10000 12000 R Figure 1: Return correlation between SPY and XLB (CXLB ) for τ = 10 (left) and τ = 60 (right). 90}. If τ = 60. 5 The number of samples in the 9AM and 10AM bins depends on the value of τ . Each point in the ﬁgure represents the mean correlation for that hour.4 −0.2 0 −0.5 Correlation 0.3 −0. I compare the correlation of the bottom of the U with the sides of the U by comparing the mean correlation around the lunch hour with the correlation away from the lunch hour. Here. 4 For example.4 This binning allows us to look at correlation dynamics that appear to be dependent on the hour of the day in which they occur. the U-shaped pattern is clearly visible for τ = 60.9 0. 4 .5 3.4 0.8 0. I bin each value of C R and C V by the hour in which the period occurred. In order to put numbers to this shape. the day.4 1 Correlation between S&P 500 and XLB 0. Though no hour has a statistically diﬀerent mean from another hour. values of C R at 3:00PM on September 2nd and 3:59PM on September 9th are contained in the same 3PM (15) bin.8 0. (12 + 60 ± 1.6 0.5 0 0.2 0. Correlation between S&P 500 and XLB 1 0.6 0. To do so. Figure 4 shows that this U-shape is also present for values of τ ∈ {10.Correlation between S&P 500 and XLB 1 Correlation between S&P 500 and XLB 1 0. adjusted for the window size τ .in other words. 30.8 0.7 Correlation 0. then the 9AM bin contains 0 samples and the 10AM bin contains 1680 samples.

75 0.65 0.5 0.001 level for all sectors for τ = 30.8 0.55 0. the mean.6 0.55 0.4 0.6 0. and correlation of the volume matrix V are calculated.9 0.55 0.5 0. One might wonder whether intraday patterns also exist in the correlation of volumes between the S&P 500 and sector indices.6 0.5 0.5 8 9 10 11 12 13 Hour of Day 14 15 16 17 0.9 Average Return Correlation between SPY and Sector Indices 0. the hypothesis is rejected for ﬁve of eight sectors. A two-sample Kolmogorov-Smirnov test rejects the possibility that the distributions are identical at the α = 0. These calculations are also 6 See Figures 7 through 11 in the appendix for all ﬁgures. the Wilcoxon rank sum test rejects the hypothesis that the distributions have identical mean at the α = 0. Right: τ = 90. Figure 5 shows the behavior of the volume correlation with a trailing hourly (τ = 60) window over the course of a day.85 0. Error bars indicate the mean standard deviation. just as Figure 3 demonstrated for return correlation above.001 level for every sector for τ = 10.9 Average Return Correlation between SPY and Sector Indices 0. standard deviation. The results are shown in Table 1 and clearly demonstrate that the mean of the mid-day correlation is lower than the mean of the opening and closing hours’ correlation across all sector indices.6 Average Return Correlation between SPY and Sector Indices 1 0.6 0.75 Average ρ Average ρ 0.85 0. except instead of calculating the equations above on the return matrix R.8 0. 90. For τ = 10.45 0. Figure 2 above shows sample behavior of volume correlation. Left: τ = 10.7 0.65 Average ρ 9 10 11 12 13 Hour of Day 14 15 16 17 0. 5 . Error bars indicate the mean standard deviation.7 0.4 0.7 0.85 0.9 0. the trend as a whole is present across all sectors and all time scales.45 10 11 12 13 14 Hour of Day 15 16 17 Figure 4: Return correlation to SPY. 30.8 0. including ﬁgures for all values of τ and separate for all sector indices. Though not all of these diﬀerences are statistically signiﬁcant. This analysis proceeds just as above. Furthermore. averaged over all sector indices. The results above clearly indicate that a U-shaped pattern exists in the correlation of returns between between the S&P 500 and sector indices.8 0.7 0. 60. 90 ([12]).Average Return Correlation between SPY and Sector Indices 0.65 0.45 9 10 11 12 13 Hour of Day 14 15 16 17 Figure 3: Return correlation (τ = 60) to SPY.75 Average ρ 0. 60. averaged over all sector indices. Center: τ = 30.

however.641 0. 30. XLU. 90.677 0. The test cannot reject the hypothesis for any reasonable value of α for τ = 30 and 60.01 level for τ = 10 and 90.559 0.τ 5 10 30 60 90 Mid-Day Correlation 0. this volume correlation plot indicates that the later afternoon hours have higher correlation than earlier session hours. 90. 30. the consumer discretionary sector ETF.4 0. 30.621 0. 90}.” The hockey stick is incredibly clear for lower values of τ as seen in Figure 6.623 0. 6 . marked by stable correlation values in the ﬁrst half of the market session and sharply rising values in the second half of the market session. 60. Though the not every diﬀerence between morning and afternoon sessions is signiﬁcantly diﬀerent.1 0 9 10 11 12 13 Hour of Day 14 15 16 17 Figure 5: Volume correlation (τ = 60) to SPY. averaged over all sector indices. XLU is only signiﬁcant at the α = 0. is often described as a “hockey stick.7 0. Again. for τ = 60 and 90. Average Volume Correlation between SPY and Sector Indices 0.2 0. The test also cannot reject the hypothesis for XLY.001 level for nearly all sectors for τ = 10. Furthermore. the utilities sector ETF.001 level for all but one sector for τ = 10.3 0. The results are shown in Table 2. A two-sample Kolmogorov-Smirnov test rejects the possibility that the morning and afternoon distributions are identical at the α = 0.702 Table 1: Return correlation comparison between Mid-Day and open/close. I put numbers to the phenomenon by calculating the means for both the morning and afternoon correlations.005 level for τ = 10 and 60.629 Open/Close Correlation 0. the trend is convincing when considering that it holds qualitatively true across all sectors and values of τ . In order to more rigorously describe this trend. the Wilcoxon rank sum test rejects the hypothesis that the morning and afternoon distributions have equal median at the α = 0.592 0. Figure 6 shows that this trend is also quite clear for values of τ ∈ {10.704 0. Unlike Figure 3.6 Average ρ 0. 60. averaged over all sector indices and error bars show mean standard intervals.8 0. This trend. There are a number of possible explanations for this trend in correlation including re-balancing arbitrage and concentrated market interest. was only signiﬁcant at the α = 0.9 0.5 0.711 0. Error bars indicate the mean standard deviation.

6 0.2 0 0.467 0. information asymmetries.8 0. Furthermore. Third.316 0. Exchange-traded funds exhibit a number of peculiarities that lead to possible tracking error. exchange-traded funds are by far the best tradable. imply that the results are immediately relevant and do not include what might be described as “less relevant” data. First. the dataset is based on exchange-traded funds.9 0.409 0. Acknowledgements I would like to thank the Center for the Study of Complex Systems (CSCS) at the University of Michigan for a fruitful research environment.7 0.8 Average Volume Correlation between SPY and Sector Indices 0.396 Table 2: Volume correlation comparison between morning and afternoon.4 0. averaged over all sector indices. the results reported herein may represent dynamics that are local to this period of time. however.314 0. provide a more full description and model of the return and volume correlation processes.294 Afternoon Correlation 0. Center: τ = 30. I hope to expand upon this dataset.2 0. Whereas market liquidity or volatility may vary with demand elasticity. This trend even takes the infamous “hockey stick” shape for some sector indices and values of τ . This work was partially supported by an NSF-IGERT fellowship through 7 . Left: τ = 10. Error bars indicate the mean standard deviation.310 0.2 0. Discussion The results contained above provide evidence for the existence of two striking and previously unreported patterns.425 0.5 Average ρ Average ρ Average ρ 9 10 11 12 13 Hour of Day 14 15 16 17 0. the structural relationship between the S&P 500 and market sectors should not exhibit intraday patterns.τ 5 10 30 60 90 Morning Correlation 0. and include other asset class indices such as ﬁxed-income or commodities.4 0. Foremost among them is that the data is taken from a small period of time in the market and includes only 28 market sessions. this U-shape is possibly evidence of market ineﬃciency.1 −0.464 0.6 0. In future work.7 0. The second phenomenon observed above is that the correlation of volume between the S&P 500 and sectors indices exhibits lower correlation in the morning and rapidly increasing correlation in the afternoon. Right: τ = 90. I hope to disentangle this relationship in future work by detrending the data for previously observed intraday patterns. the volume correlation results are likely aﬀected by the previously observed U-shape in volume.6 0. and inventory management.4 0.5 0. the correlation between the S&P 500 and sector indices is not time-stationary within a day. highly liquid proxies to the S&P 500 and market sectors that are available.8 1 0. 4.312 0. Therefore.3 0. Second.3 0.1 0. Average Volume Correlation between SPY and Sector Indices 1. This does. This is the result of an extreme U-shape in covariance and is a phenomena separate from the previously observed U-shape in volatility.2 Average Volume Correlation between SPY and Sector Indices 0. However. The rapid growth of high-frequency trading has likely altered market microstructure over the past ﬁve years. Both of these results have implications for strategies that are based on the assumption that correlation between sector indices and the market are time-stationary within a day.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 0 0 10 11 12 13 14 Hour of Day 15 16 17 Figure 6: Volume correlation to SPY. This brief note has a number of shortcomings.

D. Intraday volatility in the stock index and stock index futures markets. Inc. Bollerslev. Cornett. 1995. 1988. Bollerslev. Journal of Finance 40:72374. [15] T. Chung. S. Ronn. Szakmary. 1992.. 10. Peterson. 1964-1989. [18] A. [14] L. 47:753-64. 1990. Dyn. 2002. [11] L. A theory of intraday patterns: Volume and price variability. Joh. J. 8:277-298.com/ article/SB10001424052748704392104575475781704072278. A. A. D. McInish. Hollander. E. Nonparametric Statistical Methods. Foster.C. Ekman. Karolyi. 45:591-601. 1992. 1985. R. Journal of Business Finance and Accounting. Ann Arbor. Lockwood. Kleidon. Chan. [4] R. 58:565-585. 22:789-809. Institutions. G. Wood. [5] W. Wall Street Journal. Review of Financial Studies 1:3-40. Working Paper. 1991. Admati. 19:843-869. [16] P. 3:593624. Journal of Econ. 53:219-265. Macroeconomic Announcements. Periodic market closure and trading volume: a model of intraday bids and asks. 4:657-684. Intra-day and inter-market volatility in foreign exchange rates. Baillie. Brockman. Journal of Banking and Finance. G. 2001. Wood. [10] F. Basu. Intraday patterns in the S&P500 index futures market. A. A theory of interday variations in volumes. NJ: John Wiley and Sons. The Traders Who Skip Most of the Day. Journal of Financial and Quantitative Analysis. Review of Economic Studies. Chan. 1988. References [1] A. Harris. McInish. Journal of Financial Economics 16:99117. [17] K. 2000. Linn. Jain. An investigation of intraday data for NYSE stocks. The dependence between hourly prices and trading volume. An analysis of intraday patterns in bid/ask spreads for NYSE Stocks. Deutsche MarkDollar Volatility: Intraday Activity Patterns. 1999. K. S. Appendix 8 . Ord. Andersen. T. [19] R. Schwarz.and intra-day liquidity patterns on the Stock Exchange of Hong Kong. P. W. [2] T. Wolfe. A. Review of Financial Studies. http://online. Viswanathan. An examination of stock market return volatility during overnight and intraday periods. [12] M.html. 16:451489. Pﬂeiderer. The Review of Financial Studies. Inter. 1994. and Longer Run Dependencies. 1990. Sep. Brock. variances and trading costs in securities markets. and Money. T. 23:269-84. Journal of Finance. Pasquariello. T. [3] A. [13] P. T. A Characterization of the Daily and Intraday Behavior of Returns on Options. S. Journal of International Financial Markets. 49:557-579. 2010. A transaction data survey of weekly and intraday patterns in stock patterns. The Microstructure of Currency Markets: An Empirical Model of Intra-day Return and Bid-Ask Spread Behavior. Atkins. [9] P. 1990. 1986. Journal of Futures Markets.the Center for the Study of Complex Systems (CSCS) at the University of Michigan. [6] P. [8] M. Journal of Finance. D. 1992. Hoboken. Sheikh. Journal of FInance. [7] K. Journal of Finance. Seasonalities and intraday return patterns in the foreign currency futures market. 1998.wsj. 12:365-81. The eﬀect of after-hours announcements on the intraday U-shaped volume pattern. Control.

4 0.1 1 1 0.8 0.4 0.1 Intraday Return Correlation between SPY and XLY 1.1 1 1 0.4 0.9 0.7 0.2 0 −0.Error bars indicate one standard deviation.8 0.8 0.6 0.7 ρ ρ 0.5 0.2 1 0.5 0.6 0.6 0.8 0.2 1.7 ρ 0.8 0.4 0.2 0.2 1.4 9 8 9 10 11 12 13 Hour of Day 14 15 16 17 8 9 10 11 12 13 Hour of Day 14 15 16 17 Figure 7: Panel of intraday return correlation between S&P 500 and sector indices for window size τ = 5.7 ρ 0.4 0.2 Intraday Return Correlation between SPY and XLI 1.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 −0.Intraday Return Correlation between SPY and XLB 1.6 ρ ρ 0.1 Intraday Return Correlation between SPY and XLE 1.4 1.5 0.8 0. .2 0 0.3 0.2 0 0 −0.8 0.8 0.9 0.2 0.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Return Correlation between SPY and XLP 1.6 0.5 0.6 0.9 1 0.3 8 9 10 11 12 13 Hour of Day 14 15 16 17 0.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Return Correlation between SPY and XLF 1.9 0.6 ρ 8 9 10 11 12 13 Hour of Day 14 15 16 17 0.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Return Correlation between SPY and XLV 1.2 1.4 ρ 0.2 Intraday Return Correlation between SPY and XLU 1 1 0.4 0.6 0.

6 0.4 0.9 0.3 0.8 0.65 0.7 0.6 0.5 0.7 0.6 0.8 0.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 0.8 0.7 0.5 8 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Return Correlation between SPY and XLF 0.7 ρ 0.5 ρ ρ 0.5 0.8 0.9 0.8 0.3 0.8 0.1 0 8 9 10 11 12 13 Hour of Day 14 15 16 17 0 8 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Return Correlation between SPY and XLV 1.7 ρ ρ 0.6 0.4 0.7 ρ 0.1 ρ 8 9 10 11 12 13 Hour of Day 14 15 16 17 0.75 0.9 0.7 0.1 0.2 1 Intraday Return Correlation between SPY and XLY 1.2 0.4 0.8 0.4 8 9 10 11 12 13 Hour of Day 14 15 16 17 Figure 8: Panel of intraday return correlation between S&P 500 and sector indices for window size τ = 10.5 0.9 0.Intraday Return Correlation between SPY and XLB 1 1 Intraday Return Correlation between SPY and XLE 0.9 0. ρ .7 0.1 0.2 0.85 0.55 8 9 10 11 12 13 Hour of Day 14 15 16 17 0.4 0.Error bars indicate one standard deviation.6 0.9 1 0.3 10 0.6 0.5 0.8 0.9 1 Intraday Return Correlation between SPY and XLI 0.6 0.9 Intraday Return Correlation between SPY and XLU 0.5 0.4 8 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Return Correlation between SPY and XLP 0.2 0.6 0.5 0.95 0.3 0.4 0.

7 0.8 0.85 0.8 0.9 1 Intraday Return Correlation between SPY and XLE 0.8 0.5 10 11 12 13 Hour of Day 14 15 16 17 Intraday Return Correlation between SPY and XLF 1 0.7 0.8 0.9 0.6 0.75 ρ 0.9 0.55 0.65 0.7 ρ 0.55 9 10 11 12 13 Hour of Day 14 15 16 17 Figure 9: Panel of intraday return correlation between S&P 500 and sector indices for window size τ = 30.2 9 10 11 12 13 Hour of Day 14 15 16 17 0.6 ρ 0.9 0.4 0.7 0.95 0.Intraday Return Correlation between SPY and XLB 0.85 0.Error bars indicate one standard deviation.55 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Return Correlation between SPY and XLP 1 1 Intraday Return Correlation between SPY and XLU 0.9 0.6 0.75 0.6 0.9 0.5 0.7 0.2 0.8 0.65 0.95 Intraday Return Correlation between SPY and XLY 0.9 0.75 0.4 0.7 0.65 9 0.5 ρ 9 10 11 12 13 Hour of Day 14 15 16 17 0.7 9 10 11 12 13 Hour of Day 14 15 16 17 0.85 0.7 ρ ρ 0.95 Intraday Return Correlation between SPY and XLI 0.5 0. .4 0.8 0.9 0.85 0.75 0.6 ρ 0.5 ρ 0.6 11 9 10 11 12 13 Hour of Day 14 15 16 17 0.3 0.8 0.4 0.2 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Return Correlation between SPY and XLV 1 0.3 0.6 0.65 0.8 0.3 0.

6 ρ ρ 0.7 0.35 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Return Correlation between SPY and XLP 0. .9 0.65 9 0.65 0.6 0.95 1 Intraday Return Correlation between SPY and XLE 0.7 0.8 1 Intraday Return Correlation between SPY and XLI 0.7 0.95 0.8 0.85 0.55 0.9 0.7 0.65 0.8 0.85 0.35 0.9 0.8 0.75 0.Error bars indicate one standard deviation.75 0.7 0.7 0.7 9 10 11 12 13 Hour of Day 14 15 16 17 0.45 0.8 0.6 0.Intraday Return Correlation between SPY and XLB 0.9 0.6 0.75 ρ 0.65 0.65 0.55 10 11 12 13 Hour of Day 14 15 16 17 Intraday Return Correlation between SPY and XLF 0.9 0.95 0.7 0.75 ρ ρ 0.45 0.8 ρ 0.4 0.65 0.4 0.8 Intraday Return Correlation between SPY and XLU 0.85 0.55 0.45 0.55 0.6 ρ 9 10 11 12 13 Hour of Day 14 15 16 17 0.75 0.2 9 10 11 12 13 Hour of Day 14 15 16 17 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Return Correlation between SPY and XLV 0.3 0.55 9 10 11 12 13 Hour of Day 14 15 16 17 Figure 10: Panel of intraday return correlation between S&P 500 and sector indices for window size τ = 60.95 Intraday Return Correlation between SPY and XLY 0.5 0.8 0.5 0.9 0.65 0.4 12 0.85 0.4 0.85 0.75 0.75 0.6 0.5 0.5 ρ 9 10 11 12 13 Hour of Day 14 15 16 17 0.

6 0.6 0.95 0.7 0.85 0.45 0.3 0.8 0.75 0.8 0.8 ρ 0.65 0.5 0.65 0.45 0.9 0.5 0.45 ρ 11 12 13 14 Hour of Day 15 16 17 0.4 0.95 0.8 1 Intraday Return Correlation between SPY and XLI 0.6 ρ 11 12 13 14 Hour of Day 15 16 17 0.65 0.7 0.9 0.95 1 Intraday Return Correlation between SPY and XLE 0.7 0.Intraday Return Correlation between SPY and XLB 0.55 10 11 12 13 14 Hour of Day 15 16 17 Intraday Return Correlation between SPY and XLF 0.9 1 Intraday Return Correlation between SPY and XLY 0.75 ρ ρ 0.65 0.65 0.8 Intraday Return Correlation between SPY and XLU 0.85 0.Error bars indicate one standard deviation.9 0.8 0.35 10 10 11 12 13 14 Hour of Day 15 16 17 Intraday Return Correlation between SPY and XLP 0.65 0.9 0.25 10 10 11 12 13 14 Hour of Day 15 16 17 Intraday Return Correlation between SPY and XLV 0.4 0.75 0.4 0.7 0.75 0.6 0.5 ρ 11 12 13 14 Hour of Day 15 16 17 0.5 0.75 0.75 0.7 0.85 0.7 0.7 11 12 13 14 Hour of Day 15 16 17 0.45 0.7 0.35 0.6 0.75 0.55 0.95 0.55 0.55 ρ 0.75 0.85 0.85 0.4 10 13 10 11 12 13 14 Hour of Day 15 16 17 Figure 11: Panel of intraday return correlation between S&P 500 and sector indices for window size τ = 90.65 0. .65 10 0.8 ρ 0.35 0.55 0.

2 0 0 −0.4 ρ ρ 0.4 0.2 −0.4 0.2 Intraday Volume Correlation between SPY and XLE 1 1 0.8 0.4 0.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 −0.6 0.2 0.6 ρ ρ 0.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 Figure 12: Panel of intraday volume correlation between S&P 500 and sector indices for window size τ = 5.2 1.2 Intraday Volume Correlation between SPY and XLY 1 1 0.6 0.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Volume Correlation between SPY and XLV 1.2 1 Intraday Volume Correlation between SPY and XLI 1 0.4 0.6 ρ ρ 0.4 0.2 −0.Intraday Volume Correlation between SPY and XLB 1.6 ρ ρ 0.8 0.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 14 −0.2 0.8 0.2 Intraday Volume Correlation between SPY and XLU 0. .4 8 9 10 11 12 13 Hour of Day 14 15 16 17 −0.2 0 0 −0.2 0 0 −0.8 1 0.4 8 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Volume Correlation between SPY and XLP 1 1.6 0.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 −0.8 0.4 0.2 0.8 0.2 1.6 0.8 0.8 0.4 0 0.2 0 −0.Error bars indicate one standard deviation.2 0.6 0.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Volume Correlation between SPY and XLF 1.

8 0.Error bars indicate one standard deviation.8 0.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 15 −0.8 0.1 8 9 10 11 12 13 Hour of Day 14 15 16 17 0 8 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Volume Correlation between SPY and XLF 1.4 0.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 Figure 13: Panel of intraday volume correlation between S&P 500 and sector indices for window size τ = 10.6 0.1 8 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Volume Correlation between SPY and XLV 1.6 0.2 1.8 1 0.4 0.2 Intraday Volume Correlation between SPY and XLE 1 0.2 1.3 0.7 0.2 0.8 0.4 0.4 ρ 0.9 Intraday Volume Correlation between SPY and XLU 0.6 ρ ρ 0.2 Intraday Volume Correlation between SPY and XLY 1 1 0.2 0.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 −0.9 1 0.1 −0.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Volume Correlation between SPY and XLP 1.2 8 9 10 11 12 13 Hour of Day 14 15 16 17 0.6 ρ ρ 0.4 0.Intraday Volume Correlation between SPY and XLB 1.2 0 0 −0.6 0.5 0.8 0.2 0.4 0.2 Intraday Volume Correlation between SPY and XLI 1 1 0.7 0.2 0.4 0.2 0 0 −0.6 0.8 0.5 ρ 0.4 ρ ρ 0.2 0.8 0.2 0.6 0.2 0 −0.3 0.6 0. .2 0 0 −0.

4 0.2 0.7 0.5 ρ ρ 0.1 0 0 9 10 11 12 13 Hour of Day 14 15 16 17 −0.5 0.8 0.3 0.4 0.7 0.8 0.6 0.8 0.2 0.4 0.1 0 9 10 11 12 13 Hour of Day 14 15 16 17 0 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Volume Correlation between SPY and XLP 0.5 0.4 0.2 0.5 0.6 0.5 0.7 0.1 0. .3 0.2 0.9 Intraday Volume Correlation between SPY and XLE 0.3 0.7 0.3 0.1 0 −0.Error bars indicate one standard deviation.6 0.1 0 9 0.5 ρ ρ 0.1 9 10 11 12 13 Hour of Day 14 15 16 17 10 11 12 13 Hour of Day 14 15 16 17 Intraday Volume Correlation between SPY and XLF 0.9 0.6 0.2 0.4 ρ ρ 0.8 0.5 0.6 0.8 0.3 0.4 0.9 Intraday Volume Correlation between SPY and XLY 0.7 0.3 0.6 0.8 Intraday Volume Correlation between SPY and XLU 0.5 ρ ρ 0.6 0.6 0.4 0.1 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Volume Correlation between SPY and XLV 0.7 0.8 0.4 0.1 0.1 0.2 0.2 0.9 Intraday Volume Correlation between SPY and XLI 0.9 0.2 0.3 0.3 0.9 0.8 0.7 0.Intraday Volume Correlation between SPY and XLB 0.1 16 0 9 10 11 12 13 Hour of Day 14 15 16 17 0 9 10 11 12 13 Hour of Day 14 15 16 17 Figure 14: Panel of intraday volume correlation between S&P 500 and sector indices for window size τ = 30.9 0.7 0.

4 0.8 0.3 0.8 0.3 0.3 0.7 0.1 0 9 10 11 12 13 Hour of Day 14 15 16 17 0 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Volume Correlation between SPY and XLV 0.1 17 0 9 10 11 12 13 Hour of Day 14 15 16 17 0 9 10 11 12 13 Hour of Day 14 15 16 17 Figure 15: Panel of intraday volume correlation between S&P 500 and sector indices for window size τ = 60.4 0.2 0.5 0.7 0.8 0.1 0.3 0.6 0.8 0.5 0.5 0. .2 0.6 0.7 0.5 0.6 0.6 0.8 0.1 10 11 12 13 Hour of Day 14 15 16 17 Intraday Volume Correlation between SPY and XLP 0.Intraday Volume Correlation between SPY and XLB 0.9 0.6 0.2 0.2 0.4 0.7 0.1 0 9 10 11 12 13 Hour of Day 14 15 16 17 0 9 10 11 12 13 Hour of Day 14 15 16 17 Intraday Volume Correlation between SPY and XLF 0.9 0.9 Intraday Volume Correlation between SPY and XLE 0.2 0.8 0.4 ρ ρ 0.5 ρ ρ 0.6 0.3 0.7 0.1 9 10 11 12 13 Hour of Day 14 15 16 17 0 9 0.9 Intraday Volume Correlation between SPY and XLI 0.5 0.7 0.2 0.6 0.9 Intraday Volume Correlation between SPY and XLY 0.1 0.4 0.7 0.4 ρ ρ 0.2 0.Error bars indicate one standard deviation.3 0.2 0.5 0.3 0.3 0.6 0.9 0.4 0.4 0.1 0.7 0.5 ρ ρ 0.8 0.8 Intraday Volume Correlation between SPY and XLU 0.

4 ρ ρ 0.2 0.2 0.6 0.9 Intraday Volume Correlation between SPY and XLE 0.3 0.7 0.2 0.1 10 11 12 13 14 Hour of Day 15 16 17 0.2 0.7 0.6 0.6 0.8 0.5 0.4 0.3 0.2 0.2 0.2 0.8 0.5 0.6 0.3 0. .1 0.3 0.5 0.4 ρ 0.8 0.7 0.1 10 11 12 13 14 Hour of Day 15 16 17 0 10 11 12 13 14 Hour of Day 15 16 17 Intraday Volume Correlation between SPY and XLV 0.5 0.7 0.5 ρ ρ 0.6 0.4 0.6 0.2 0.7 0.4 0.5 0.4 0.6 0.3 ρ 0.Error bars indicate one standard deviation.1 18 0 10 11 12 13 14 Hour of Day 15 16 17 0 10 11 12 13 14 Hour of Day 15 16 17 Figure 16: Panel of intraday volume correlation between S&P 500 and sector indices for window size τ = 90.8 Intraday Volume Correlation between SPY and XLI 0.8 Intraday Volume Correlation between SPY and XLY 0.1 0.7 0.5 0.5 ρ ρ 0.3 0.1 11 12 13 14 Hour of Day 15 16 17 0 10 0 10 11 12 13 14 Hour of Day 15 16 17 Intraday Volume Correlation between SPY and XLF 0.4 0.1 0.3 0.Intraday Volume Correlation between SPY and XLB 0.8 0.1 10 11 12 13 14 Hour of Day 15 16 17 Intraday Volume Correlation between SPY and XLP 0.4 0.3 0.7 Intraday Volume Correlation between SPY and XLU 0.7 0.8 0.6 0.

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