Delta-Hedging Demand and Intraday Momentum : Evidence from China

This paper reveals that the rest-of-day (before the last 30 minutes to market close) return can significantly predict the last half-hour return in the Chinese SSE 50 exchange-traded fund market. Its predictive power is economically significant and will decay in the next three days. Moreover, it reveals the relationship between intraday return prediction and short gamma hedging demand from option market makers, demonstrating that intraday hedging could be postponed till the end of a trading day. Intraday momentum caused by rebalancing traders and information investors cannot be completely offset by option market makers on days with positive net gamma exposure