The Cross-Section of Intraday and Overnight Returns
45 Pages Posted: 16 Nov 2016 Last revised: 22 Nov 2017
Date Written: November 21, 2017
This paper documents substantial cross-sectional variation in average stock returns over the trading day and overnight. Small stocks perform well near the close, while large stocks perform poorly. The evidence differs from a benchmark based on random portfolios and supports theories based on institutional effects and information asymmetry. These theories, however, do not fully explain the cross-sectional patterns. Portfolios formed on beta and idiosyncratic volatility earn returns gradually throughout the trading day but tend to incur large negative returns overnight, consistent with mispricing at the open.
Keywords: Intraday Returns, Overnight Returns, Asset Pricing Anomalies, Liquidity
JEL Classification: G10, G12, G14
Suggested Citation: Suggested Citation