Overnight Momentum, Informational Shocks, and Late-Informed Trading in China

43 Pages Posted: 5 Nov 2019

See all articles by Ya Gao

Ya Gao

Tianjin University - College of Management and Economics

Xing Han

University of Auckland Business School

Youwei Li

Hull University Business School

Xiong Xiong

College of Management and Economics and China Center for Social Computing and Analytics

Date Written: October 26, 2019

Abstract

Based on high-frequency firm-level data, this paper uncovers new empirical patterns on intraday momentum in China. First, there exists a strong intraday momentum effect at the firm level. Second, the intraday predictability stems mainly from the overnight component rather than the opening half-hour component, which is consistent with the microstructure features of the Chinese market. Third, the intraday predictability attenuates (strengthens) following large positive (negative) informational shocks, implying a striking asymmetric reaction by market participants. Finally, we document that late-informed traders are relatively less experienced or skillful. Overall, the empirical results lend support to the model of late-informed trading.

Keywords: intraday momentum, overnight return, price jump, late-informed trading

JEL Classification: G12, G14, G15, G17

Suggested Citation

Gao, Ya and Han, Xing and Li, Youwei and Xiong, Xiong, Overnight Momentum, Informational Shocks, and Late-Informed Trading in China (October 26, 2019). Available at SSRN: https://ssrn.com/abstract=3475882 or http://dx.doi.org/10.2139/ssrn.3475882

Ya Gao

Tianjin University - College of Management and Economics

NO.92 Weijin Road
Nankai District
Tianjin, 300072
China

Xing Han

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

Youwei Li (Contact Author)

Hull University Business School ( email )

University of Hull
Hull, HU6 7RX
United Kingdom

Xiong Xiong

College of Management and Economics and China Center for Social Computing and Analytics ( email )

92, Weijin Road
Nankai District
Tianjin, Tianjin 300072
China

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