Intraday momentum strategy predictability disappears, understanding return dynamics crucial for success.
The article explores how predicting stock returns based on overnight performance can be unreliable in real-world trading. By using a model that identifies different market conditions, researchers found that the success of this strategy depends on the strength of the signal. They also discovered that understanding how returns change over time is crucial for making profitable investment decisions. Ultimately, a strategy that sets specific thresholds for trading outperformed one that was always active.