Overnight Return, the Invisible Hand Behind Intraday Returns?
Journal of Applied Finance, Fall/Winter 2012, Volume 22, No. 2
Posted: 16 Jul 2013
Date Written: July 15, 2013
An efficient market (weak form) will contain no significant price pattern, a view supported by numerous empirical studies. Our study, however, reveals a very strong negative autocorrelation between overnight and intraday returns, regardless of our sampling method or the methodology in use. Though this poses potential market mispricing opportunities, we conclude that future studies are needed in order to determine whether anyone other than a market maker can fully exploit these opportunities.
Keywords: efficient markets, autocorrelation, net asset value, overnight returns, intraday returns
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