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Price Gaps: Another Market Anomaly?

Brunel University London, Dept. of Economics and Finance Working Paper No. 16-16

25 Pages Posted: 11 Oct 2016  

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute)

Oleksiy Plastun

Sumy State University

Date Written: September 9, 2016

Abstract

This paper analyses price gaps (also known as trading, opening, common, stock, morning gaps – all these terms being used to indicate that the current day’s opening price is not the same as the previous day’s closing price), which have been detected at times in stock, FOREX and commodity markets. Applying a variety of statistical tests we are able to show that in most cases the observed price behaviour is not inconsistent with market efficiency, the exception being the FOREX: in this case a trading strategy based on exploiting this anomaly can generate abnormal profits.

Keywords: Price Gaps, Trading Strategy, Technical Analysis, FOREX, Stock Market, Commodities, Anomaly, Efficient Market Hypothesis

JEL Classification: G12, C63

Suggested Citation

Caporale, Guglielmo Maria and Plastun, Oleksiy, Price Gaps: Another Market Anomaly? (September 9, 2016). Brunel University London, Dept. of Economics and Finance Working Paper No. 16-16. Available at SSRN: https://ssrn.com/abstract=2850057

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance ( email )

Kingston Lane
Marie Jahoda Building
Uxbridge, Middlesex UB8 3PH
United Kingdom
+44 1895 266713 (Phone)
+44 1895 269770 (Fax)

HOME PAGE: http://www.brunel.ac.uk/about/acad/bbs/bbsstaff/ef_staff/guglielmocaporale/

London South Bank University ( email )

Centre for Monetary and Financial Economics
London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Oleksiy Plastun (Contact Author)

Sumy State University ( email )

Rymskyi-Korsakov str., 2
Sumy, 40000
Ukraine

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