Overnight momentum, informational shocks, and late informed trading in China
Release Time:2019-12-07 Hits:
Indexed by:Journal Papers
Date of Publication:2019-11-01
Journal:INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS
Included Journals:SSCI
Volume:66
ISSN:1057-5219
Key Words:Intraday momentum; Overnight return; Price jump; Late-informed trading
Abstract:Based on high-frequency firm-level data, this paper uncovers new empirical patterns on intraday momentum in China. First, there exists a strong intraday momentum effect at the firm level. Second, the intraday predictability stems mainly from the overnight component rather than the opening half-hour component, which is consistent with the microstructure features of the Chinese market. Third, the intraday predictability attenuates (strengthens) following large positive (negative) informational shocks, implying a striking asymmetric reaction by market participants. Finally, we document that late-informed traders are relatively less experienced or skilful. Overall, the empirical results lend support to the model of late-informed trading.