Overnight-Intraday Return Gap and the Retail Ebb and Flow

43 Pages Posted: 5 Apr 2024

See all articles by Yongkil Ahn

Yongkil Ahn

National Taiwan Normal University

Alfred Qi Fan

Singapore Management University

Don Noh

Hong Kong University of Science & Technology (HKUST)

Stella Y. Park

University of Pennsylvania - The Wharton School

Date Written: February 20, 2024

Abstract

In most stock markets, average overnight (close-to-open) returns are high while intraday (open-to-close) returns are low, even negative. We show that retail trading proportion (RTP) is a major explanatory variable for this "overnight-intraday return gap" by using data from Korea where accurate and exhaustive retail trade flows are available. To establish a causal relationship between the return gap and RTP, we use an instrumental variables approach that exploits retail investors' tendency to more actively trade stocks with low per-share prices. We attribute this relationship to the recurrent retail ebb and flow stemming from the retail investors' demand for daytime stock market exposure.

Keywords: Overnight return, intraday return, retail investors, price pressure, retail trading proportion

JEL Classification: G02, G12

Suggested Citation

Ahn, Yongkil and Fan, Alfred Qi and Noh, Don and Park, Stella Y., Overnight-Intraday Return Gap and the Retail Ebb and Flow (February 20, 2024). Available at SSRN: https://ssrn.com/abstract=4752520 or http://dx.doi.org/10.2139/ssrn.4752520

Yongkil Ahn

National Taiwan Normal University ( email )

No. 162, Section 1
Heping East Road
Taipei City, Da’an District 106
Taiwan

Alfred Qi Fan

Singapore Management University

50 Stamford Road
Singapore, 178899
Singapore

Don Noh (Contact Author)

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Stella Y. Park

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
131
Abstract Views
518
Rank
404,802
PlumX Metrics