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How do investors react to overnight returns? Evidence from Korea

Author

Listed:
  • Ham, Hyuna
  • Ryu, Doojin
  • Webb, Robert I.
  • Yu, Jinyoung

Abstract

We find a negative relationship between overnight and daytime returns on the Korean equity market. Overnight returns are positively (negatively) and nonlinearly associated with subsequent daytime returns when the overnight news is relatively good (bad). Trades by individual investors respond negatively to overnight returns, whereas those by domestic and foreign institutional investors exhibit positive-feedback trading behavior. Our findings challenge the conventional presumption about investors’ responses to overnight returns.

Suggested Citation

  • Ham, Hyuna & Ryu, Doojin & Webb, Robert I. & Yu, Jinyoung, 2023. "How do investors react to overnight returns? Evidence from Korea," Finance Research Letters, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323001526
    DOI: 10.1016/j.frl.2023.103779
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    References listed on IDEAS

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    Cited by:

    1. Jinyoung Yu & Young‐Chul Kim & Doojin Ryu, 2024. "Left‐digit biases: Individual and institutional investors," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(3), pages 518-532, March.

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    More about this item

    Keywords

    Daytime reversal; Institutional investor; Korean equity market; Overnight return; Individual investor;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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