Affiliation:
1. Department of Finance, Fowler College of Business San Diego State University California San Diego USA
Abstract
AbstractThis paper demonstrates that overnight returns are subject to highly persistent biases and examines the profitability of overnight‐only investments in that context. Overnight returns tend to exceed their intraday counterparts, and the paper first reconciles these patterns by introducing a model that factors in systematic biases. This model identifies one‐fifth of stocks as having positive and statistically significant overnight biases. Investing overnight in these stocks in the next year yields twice the market's return for a third of the market beta. Results also have implications for daytime investors as these stocks underperform intraday. Implementation costs and issues are discussed.
Subject
Economics and Econometrics,Finance