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Return Differences between Trading and Non-Trading Hours: Like Night and Day

48 Pages Posted: 27 Mar 2008 Last revised: 29 Sep 2008

Michael J. Cooper

University of Utah - David Eccles School of Business

Michael T. Cliff

Analysis Group

Huseyin Gulen

Purdue University - Krannert School of Management

Date Written: September 26, 2008

Abstract

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.

Keywords: anomalies, non-trading, market closure, weekend effect

JEL Classification: G1, G12, G14

Suggested Citation

Cooper, Michael J. and Cliff, Michael T. and Gulen, Huseyin, Return Differences between Trading and Non-Trading Hours: Like Night and Day (September 26, 2008). Available at SSRN: https://ssrn.com/abstract=1004081 or http://dx.doi.org/10.2139/ssrn.1004081

Michael J. Cooper (Contact Author)

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

Michael T. Cliff

Analysis Group ( email )

800 17th St, N.W.
Suite 400
Washington, DC 20006
United States
(202) 530-2010 (Phone)

Huseyin Gulen

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

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