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Overnight and Daytime Stock-Return Dynamics on the London Stock Exchange: The Impact of the "Big Bang" and the 1987 Stock-Market Crash

Author

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  • Masulis, Ronald W
  • Ng, Victor K

Abstract

The authors explore the time-series properties of stock returns on the London Stock Exchange around the 1986 market restructuring (Big Bang) and the 1987 stock market crash using a modified GARCH model. Using this general dynamic model, which allows intradaily returns to have different impacts and persistence of stock return volatility, asymmetric return effects on volatility, and intradaily returns to follow conditional distributions with different fourth moments, they uncover important changes in return dynamics and conditional fourth moments following Big Bang and the 1987 crash not reported before.

Suggested Citation

  • Masulis, Ronald W & Ng, Victor K, 1995. "Overnight and Daytime Stock-Return Dynamics on the London Stock Exchange: The Impact of the "Big Bang" and the 1987 Stock-Market Crash," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 365-378, October.
    • Handle: RePEc:bes:jnlbes:v:13:y:1995:i:4:p:365-78
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    Citations

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    Cited by:

    1. Huang, Roger D. & Masulis, Ronald W., 2003. "Trading activity and stock price volatility: evidence from the London Stock Exchange," Journal of Empirical Finance, Elsevier, vol. 10(3), pages 249-269, May.
    2. Suchard, Jo-Ann, 2005. "The use of stand alone warrants as unique capital raising instruments," Journal of Banking & Finance, Elsevier, vol. 29(5), pages 1095-1112, May.
    3. Tse, Yiuman, 1998. "International transmission of information: evidence from the Euroyen and Eurodollar futures markets," Journal of International Money and Finance, Elsevier, vol. 17(6), pages 909-929, December.
    4. Tianyi Wang & Sicong Cheng & Fangsheng Yin & Mei Yu, 2022. "Overnight volatility, realized volatility, and option pricing," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(7), pages 1264-1283, July.
    5. Katja Ahoniemi & Ana-Maria Fuertes & Jose Olmo, 2016. "Overnight News and Daily Equity Trading Risk Limits," Journal of Financial Econometrics, Oxford University Press, vol. 14(3), pages 525-551.
    6. Francis, Bill B. & Leachman, Lori L., 1998. "Superexogeneity and the dynamic linkages among international equity markets," Journal of International Money and Finance, Elsevier, vol. 17(3), pages 475-492, June.
    7. Jian, Zhihong & Li, Xupei & Zhu, Zhican, 2020. "Sequential forecasting of downside extreme risk during overnight and daytime: Evidence from the Chinese Stock Market☆," Pacific-Basin Finance Journal, Elsevier, vol. 64(C).
    8. Liu, Qingfu & Tse, Yiuman, 2017. "Overnight returns of stock indexes: Evidence from ETFs and futures," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 440-451.
    9. Tsiakas, Ilias, 2008. "Overnight information and stochastic volatility: A study of European and US stock exchanges," Journal of Banking & Finance, Elsevier, vol. 32(2), pages 251-268, February.
    10. Patrizia Perras & Niklas Wagner, 2020. "On the pricing of overnight market risk," Empirical Economics, Springer, vol. 59(3), pages 1307-1327, September.
    11. Chan, Kalok & Chockalingam, Mark & Lai, Kent W. L., 2000. "Overnight information and intraday trading behavior: evidence from NYSE cross-listed stocks and their local market information," Journal of Multinational Financial Management, Elsevier, vol. 10(3-4), pages 495-509, December.
    12. Qiao, Kenan & Dam, Lammertjan, 2020. "The overnight return puzzle and the “T+1” trading rule in Chinese stock markets," Journal of Financial Markets, Elsevier, vol. 50(C).

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