Overnight momentum, informational shocks, and late informed trading in China

Gao, Ya; Han, Xing; Li, Youwei; Xiong, Xiong

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.

Citation

Gao, Y., Han, X., Li, Y., & Xiong, X. (2019). Overnight momentum, informational shocks, and late informed trading in China. International review of financial analysis, 66, 101394. https://doi.org/10.1016/j.irfa.2019.101394

• Journal Article Type: Article
• Acceptance Date: Oct 13, 2019
• Online Publication Date: Oct 22, 2019
• Publication Date: 2019-11
• Deposit Date: Oct 25, 2019
• Publicly Available Date: Apr 23, 2021
• Journal: International Review of Financial Analysis
• Print ISSN: 1057-5219
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 66
• Pages: 101394
• DOI: https://doi.org/10.1016/j.irfa.2019.101394
• Keywords: Intraday momentum; Overnight return; Price jump; Late-informed trading
• Public URL: https://hull-repository.worktribe.com/output/3001327
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S1057521919302741?via%3Dihub