Overnight Momentum, Informational Shocks, and Late-Informed Trading in China
43 Pages Posted: 5 Nov 2019
Date Written: October 26, 2019
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
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