Honors in Technology
Date of Award
Christopher D. Wallace, William J. Trainor Jr.
Thesis Professor Department
Phillip E. Pfeiffer IV
Intraday stock trading is an infamously difficult and risky strategy. Momentum and reversal strategies and long short-term memory (LSTM) neural networks have been shown to be effective for selecting stocks to buy and sell over time periods of multiple days. To explore whether these strategies can be effective for intraday trading, their implementations were simulated using intraday price data for stocks in the S&P 500 index, collected at 1-second intervals between February 11, 2021 and March 9, 2021 inclusive. The study tested 160 variations of momentum and reversal strategies for profitability in long, short, and market-neutral portfolios, totaling 480 portfolios. Long and short portfolios for each strategy were also compared to the market to observe excess returns. Eight reversal portfolios yielded statistically significant profits, and 16 yielded significant excess returns. Tests of these strategies on another set of 16 days failed to yield statistically significant returns, though average returns remained profitable. Four LSTM network configurations were tested on the same original set of days, with no strategy yielding statistically significant returns. Close examination of the stocks chosen by LSTM networks suggests that the networks expect stocks to exhibit a momentum effect. Further studies may explore whether an intraday reversal effect can be observed over time during different market conditions and whether different configurations of LSTM networks can generate significant returns.
East Tennessee State University
Honors Thesis - Open Access
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.
Whitinger, Andrew R. II, "Intraday Algorithmic Trading using Momentum and Long Short-Term Memory network strategies" (2022). Undergraduate Honors Theses. Paper 731. https://dc.etsu.edu/honors/731
Copyright by the authors.