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Short-Term Return Reversals and Intraday Transactions

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  • Kotaro Miwa

    (Tokio Marine Asset Management Co., Ltd, 1-8-2, Marunouchi, Chiyoda-ku, Tokyo, Japan)

Abstract

I examine whether a short-term reversal is attributed to past intraday or overnight price movements. The results show that intraday returns significantly reverse in the following week, while overnight returns do not, indicating that the short-term reversal is attributed to past intraday price movements. In addition, the reversal of intraday returns is stronger for more illiquid stocks and during more volatile market conditions, while the reversal is unaffected by fundamental news. This result supports the view that short-term reversals are attributable mainly to price concessions for liquidity providers to absorb intraday uninformed transactions, rather than intraday price reactions to fundamental information.

Suggested Citation

  • Kotaro Miwa, 2019. "Short-Term Return Reversals and Intraday Transactions," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 9(01), pages 1-25, March.
    • Handle: RePEc:wsi:qjfxxx:v:09:y:2019:i:01:n:s2010139219500022
    DOI: 10.1142/S2010139219500022
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