Market Closures and Cross-Sectional Stock Returns

Asia-Pacific Financial Markets, Forthcoming

45 Pages Posted: 12 Jul 2019

See all articles by Kotaro Miwa

Kotaro Miwa

Kyushu University - Faculty of Economics

Date Written: July 1, 2019

Abstract

By analyzing not only an overnight return but also a midday-recess return, namely, a stock return during midday-recess, I analyze whether and why market closures affect cross-sectional stock returns. I find strong persistence in overnight and midday-recess returns, with both returns positively associated with each other. Moreover, these out-of-trading-hours returns are negatively associated with returns during trading hours. I analyze whether these associations are explained by a different investor clientele outside trading hours (the open of the trading session) compared to during trading hours (intraday and closing of the trading session). I find that institutional ownership increases more with returns during trading hours; the finding indicates that those returns are mainly determined by institutional investors, while midday-recess and overnight returns, that is, returns outside trading hours, are not. Overall, my results support the view that market closures do affect cross-sectional returns and the influence is attributable to differences in the investor clientele.

Keywords: intraday-basis returns, investor clientele, market closure, midday-recess

JEL Classification: G12, G14

Suggested Citation

Miwa, Kotaro, Market Closures and Cross-Sectional Stock Returns (July 1, 2019). Asia-Pacific Financial Markets, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3418696

Kotaro Miwa (Contact Author)

Kyushu University - Faculty of Economics ( email )

6-19-1, Hakozaki
Higashi-ku
Fukuoka, Fukuoka 8128581
Japan

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