Interday drifts in opening stock returns

In present study, I make an effort to shed light on the actual mechanism of autocorrelations in individual stocks' opening returns. I analyze intraday price data on thirty stocks currently making up the Dow Jones Industrial Index. Employing the sample average and the sample median of opening stock returns for each of the trading days within the sample period as two alternative proxies for the general market opening returns, I document that if the previous day's market and individual stock's opening returns are taken together to explain the stock's opening returns, then the effect of the lagged general market opening returns is significantly negative, while the effect of the lagged stock's opening returns is significantly positive. Moreover, following days characterized by both positive and negative market opening returns, a given stock's opening returns tend to be higher if its previous day's opening returns were positive. Such price behavior seems to contradict the concept of market efficiency. Finally, I construct a number of portfolios based on the opening trading sessions and involving a long position in the stocks on the days when, according to the findings, their opening returns are expected to be high and a short position in the stocks on the days when, according to the findings, their opening returns are expected to be low. All the portfolios are found to yield significantly positive returns, providing an evidence for the practical applicability of the pattern of drifts in opening stock prices.