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The cross-section of intraday and overnight returns

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  • Bogousslavsky, Vincent

Abstract

I investigate cross-sectional variation in stock returns over the trading day and overnight to shed light on what drives asset pricing anomalies. Margin requirements are higher overnight, and lending fees are typically charged only on positions held overnight. Such institutional constraints and overnight risk incentivize arbitrageurs who trade on mispricing to reduce their positions before the end of the day. Consistent with this intuition, a mispricing factor earns positive returns throughout the day but performs poorly at the end of the day. This pattern strengthens in the second half of the sample and is shared by several well-known anomalies.

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  • Bogousslavsky, Vincent, 2021. "The cross-section of intraday and overnight returns," Journal of Financial Economics, Elsevier, vol. 141(1), pages 172-194.
    • Handle: RePEc:eee:jfinec:v:141:y:2021:i:1:p:172-194
    DOI: 10.1016/j.jfineco.2020.07.020
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    2. Andersen, Torben G. & Riva, Raul & Thyrsgaard, Martin & Todorov, Viktor, 2023. "Intraday cross-sectional distributions of systematic risk," Journal of Econometrics, Elsevier, vol. 235(2), pages 1394-1418.
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    More about this item

    Keywords

    Intraday returns; Overnight returns; Anomalies; Mispricing;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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