Bad Days and Good Nights: A Re-Examination of Non-Traded and Traded Period Returns

Abstract:     
We find an anomaly for traded and non-traded period returns for major non-US stock markets. Returns were significantly negative over trading periods and positive over non-traded periods, while for US stock markets, both non-traded and traded period returns were positive. This anomaly appears to be due to differences in regulatory risk management requirements for equity derivative market-makers. The introduction of Basle I based capital requirements appears to have amplified the anomaly.

Number of Pages in PDF File: 38

Keywords: Stock Market Anomalies, Return Decomposition, Close to Open, Open to Close, Skewness, Kurtosis, Basle I, Capital Requirements, Risk Management

JEL Classification: C15, G13, G19

working papers series