Lou, Dong 
ORCID: 0000-0002-5623-4338, Polk, Christopher ORCID: 0009-0008-0133-6709 and Skouras, Spyros
(2019)
A tug of war: overnight versus intraday expected returns.
Journal of Financial Economics, 134 (1).
pp. 192-213.
ISSN 0304-405X
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Abstract
We link investor heterogeneity to the persistence of the overnight and intraday components of returns. We document strong overnight and intraday firm-level return continuation along with an offsetting cross-period reversal effect, all of which lasts for years. We look for a similar tug of war in the returns of 14 trading strategies, finding in all cases that profits are either earned entirely overnight (for reversal and a variety of momentum strategies) or entirely intraday, typically with profits of opposite signs across these components. We argue that this tug of war should reduce the effectiveness of clienteles pursuing the strategy. Indeed, the smoothed spread between the overnight and intraday return components of a strategy generally forecasts time variation in that strategy's close-to-close performance in a manner consistent with that interpretation. Finally, we link cross-sectional and time-series variation in the decomposition of momentum profits to a specific institutional tug of war.
| Item Type: | Article |
|---|---|
| Official URL: | https://www.journals.elsevier.com/journal-of-finan... |
| Additional Information: | © 2018 Elsevier B.V. |
| Divisions: | Finance |
| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
| JEL classification: | G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates G - Financial Economics > G2 - Financial Institutions and Services > G23 - Pension Funds; Other Private Financial Institutions N - Economic History > N2 - Financial Markets and Institutions > N22 - U.S.; Canada: 1913- |
| Date Deposited: | 16 Apr 2018 13:53 |
| Last Modified: | 11 Dec 2024 21:36 |
| Funders: | Paul Woolley Centre |
| URI: | http://eprints.lse.ac.uk/id/eprint/87481 |
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