The Cross-Section of Intraday and Overnight Returns
49 Pages Posted: 16 Nov 2016 Last revised: 16 Mar 2019
Date Written: March 12, 2019
This paper investigates cross-sectional variation in stock returns over the trading day and overnight. Contrary to placebo anomalies, which earn most of their returns overnight, several well-known anomalies earn their returns either near the close or gradually throughout the day. Hedging risk can explain part of the cross-sectional return variation over the day. Investor clientele effects around market closures are also supported. Anomalies that perform well over the trading day perform poorly both at the open and at the close. The low returns around the close are consistent with mispricing due to short-selling constraints.
Keywords: Intraday Returns, Overnight Returns, Asset Pricing Anomalies, Mispricing
JEL Classification: G10, G12, G14
Suggested Citation: Suggested Citation