Empirical Differences between the Overnight and Day Trading Hour Returns: Evidence from the Chinese Commodity Futures

China Finance Review International, Forthcoming

Posted: 12 Dec 2017

See all articles by Juan Du

Juan Du

University of Liverpool based at XJTLU

Date Written: December 8, 2017

Abstract

In this study, commodity indices are constructed using principal components analysis to represent the market returns for day and night trading in the Chinese commodity futures market. Then VAR models are employed to predict the commodity indices' returns and squared returns. The symmetric VAR model failed to model the market returns since the asymmetric effects of positive and negative returns are not taken into account. By allowing asymmetric behavior among positive and negative variables, asymmetric VAR model is utilized to trace the leading effect of overnight returns to day trading returns. However, the symmetric VAR model outperforms the asymmetric model when evaluating the predictive power of squared returns during night trading hours.

Keywords: commodity futures indices, asymmetric VAR model, stylized facts

JEL Classification: C43, C53, G11, G17

Suggested Citation

Du, Juan, Empirical Differences between the Overnight and Day Trading Hour Returns: Evidence from the Chinese Commodity Futures (December 8, 2017). China Finance Review International, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3084620

Juan Du (Contact Author)

University of Liverpool based at XJTLU ( email )

Suzhou
China

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