Return Differences between Trading and Non-Trading Hours: Like Night and Day
Michael J. Cooper
University of Utah - David Eccles School of Business
Michael T. Cliff
Purdue University - Krannert School of Management
September 26, 2008
We use transaction-level data and decompose the US equity premium into day (open to close) and night (close to open) returns. We document the striking result that the US equity premium over the last decade is solely due to overnight returns; the returns during the night are strongly positive, and returns during the day are close to zero and sometimes negative. This day and night effect holds for individual stocks, equity indexes, and futures contracts on equity indexes and is robust across the NYSE and Nasdaq exchanges. Night returns are consistently higher than day returns across days of the week, days of the month, and months of the year. The effect is driven in part by high opening prices which subsequently decline in the first hour of trading.
Number of Pages in PDF File: 48
Keywords: anomalies, non-trading, market closure, weekend effect
JEL Classification: G1, G12, G14working papers series
Date posted: March 27, 2008 ; Last revised: September 29, 2008
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