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Trading and Returns under Periodic Market Closures

  • Harrison Hong

    (Graduate School of Business, Stanford University,)

  • Jiang Wang

    (Sloan School of Management, Massachusetts Institute of Technology, and NBER)

This paper studies how market closures affect investors' trading policies and the resulting return-generating process. It shows that closures generate rich patterns of time variation in trading and returns, including those consistent with empirical findings: (1) U-shaped patterns in the mean and volatility of returns over trading periods, (2) higher trading activity around the close and open, (3) more volatile open-to-open returns than close-to-close returns, (4) higher returns over trading periods than over nontrading periods, (5) more volatile returns over trading periods than over nontrading periods. It also shows that closures can make prices more informative about future payoffs. Copyright The American Finance Association 2000.

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Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 55 (2000)
Issue (Month): 1 (02)
Pages: 297-354

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Handle: RePEc:bla:jfinan:v:55:y:2000:i:1:p:297-354
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