Overnight Return, the Invisible Hand Behind The Intraday Return? A Retrospective

Abstract

In an effort to extend our study on the relationship between overnight and intraday returns, we expand the study horizon to include more recent, relatively “calm” market years. We find that the autocorrelation between overnight and intraday returns persisted among smaller stocks, but not for the S&P500. Such a relationship is monotonic in nature – the stronger the overnight return, the further the opposite direction of the intraday return tends to be. We also find evidence that the market has indeed become less volatile in recent years, and the market factor plays a more significant role in stock returns.

Keywords: anomaly, intraday return, overnight return, market efficiency