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Mechanism Of Autocorrelations Of Individual Stocks' Opening Returns

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  • Andrey KUDRYAVTSEV

    (The Economics and Management Department, The Max Stern Academic College of Emek Yezreel, Emek Yezreel 19300, Israel, Phone: (972) 54-564-5735)

Abstract

In present study, I analyze the actual mechanism of autocorrelations in individual stocks' opening returns. For Dow Jones Industrial Index constituents, 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 opening market returns, taken separately, a given stock's opening returns tend to be higher if its previous day's opening returns were positive. 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 results.

Suggested Citation

  • Andrey KUDRYAVTSEV, 2013. "Mechanism Of Autocorrelations Of Individual Stocks' Opening Returns," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 12, pages 37-56, June.
    • Handle: RePEc:aic:revebs:y:2013:i:12:kudryavtseva
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    More about this item

    Keywords

    Opening Returns; Return Autocorrelations; Stock Market Efficiency; Stock Price Drifts and Reversals;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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