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The Cross-Section of Intraday and Overnight Returns

45 Pages Posted: 16 Nov 2016 Last revised: 8 Jun 2017

Vincent Bogousslavsky

Boston College - Department of Finance

Date Written: June 7, 2017

Abstract

Using a thirty-year sample of U.S. stock returns, I document substantial cross-sectional variation in returns over the trading day and overnight. Market closures have a large impact on returns. Small and illiquid stocks earn high average returns in the last thirty minutes of trading. In contrast, large and liquid stocks perform poorly at this time. I find support for institutional and information asymmetry theories. But these theories do not fully explain the cross-sectional evidence. Portfolios based on other characteristics, such as beta and idiosyncratic volatility, earn their return gradually throughout the trading day–contrary to the market and a benchmark based on random portfolios. These portfolios also 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

Bogousslavsky, Vincent, The Cross-Section of Intraday and Overnight Returns (June 7, 2017). 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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