The Cross-Section of Intraday and Overnight Returns

49 Pages Posted: 16 Nov 2016 Last revised: 16 Feb 2021

Date Written: July 14, 2020

Abstract

I investigate cross-sectional variation in stock returns over the trading day and overnight to shed light on what drives asset pricing anomalies. Margin requirements are higher overnight, and lending fees are typically charged only on positions held overnight. Such institutional constraints and overnight risk incentivize arbitrageurs who trade on mispricing to reduce their positions before the end of the day. Consistent with this intuition, a mispricing factor earns positive returns throughout the day but performs poorly at the end of the day. This pattern strengthens in the second half of the sample and is shared by several well-known anomalies.

Keywords: Intraday Returns, Overnight Returns, Asset Pricing Anomalies, Mispricing

JEL Classification: G10, G12, G14

Suggested Citation

Bogousslavsky, Vincent, The Cross-Section of Intraday and Overnight Returns (July 14, 2020). Available at SSRN: https://ssrn.com/abstract=2869624 or http://dx.doi.org/10.2139/ssrn.2869624

Vincent Bogousslavsky (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

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