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How do investors react to overnight returns? Evidence from Korea

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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:

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    2. Kim, Karam & Ryu, Doojin & Yu, Jinyoung, 2024. "Star analyst activities and stock price synchronicity: Korean equity market reforms," Emerging Markets Review, Elsevier, vol. 61(C).
    3. Geul Lee & Doojin Ryu, 2026. "Overnight Reversals of Implied Higher Moments and Their Put‐Call Spreads," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 46(4), pages 698-718, April.
    4. Cheng, Rui & Frijns, Bart & Kim, Hyeongjun & Ryu, Doojin, 2024. "Effects of option incentive compensation on corporate innovation: The case of China," Economic Systems, Elsevier, vol. 48(1).
    5. Lee, Geul & Ryu, Doojin, 2024. "Investor sentiment or information content? A simple test for investor sentiment proxies," The North American Journal of Economics and Finance, Elsevier, vol. 74(C).

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    Keywords

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    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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