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

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

Authors

Ya Gao

Xing Han

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.

Journal Article Type Article
Publication Date 2019-11
Journal International Review of Financial Analysis
Print ISSN 1057-5219
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 66
Pages 101394
APA6 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
DOI https://doi.org/10.1016/j.irfa.2019.101394
Keywords Intraday momentum; Overnight return; Price jump; Late-informed trading
Publisher URL https://www.sciencedirect.com/science/article/pii/S1057521919302741?via%3Dihub
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