Intra-Day Co-movement of Stock Returns in US Banks

This paper evaluates co-movement of asset returns at intra-day bases. We regressed the quote revision of one asset on lagged returns and trades of second asset and also on pseudo-error correction part that was used by Zebedee and Kasch-Haroutounian (2009). We have used 5 minutes interval for trades of six large financial institutions in U.S. for the period of 27.03.2009 to 22.06.2009 and found that both lagged quote revisions and trade history of asset B provide valuable predictability for asset A returns. In addition, the suggested modified pseudo error correction mechanism of Zebedee and Kasch-Haroutounian (2009) highlights the predictive power of second asset by presenting new variables of spread and depth. Higher levels of spread is an indicator of asymmetric information in the market and the speed of adjustment increases with higher spread and depth; however this result is consistent in only half of the assets.