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Fractal insights into overnight and intraday returns: Unraveling global market heterogeneity

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  • Si, Yuancheng
  • Nadarajah, Saralees

Abstract

Do overnight and intraday returns of global stock markets truly reflect all available information, or do hidden patterns reveal exploitable inefficiencies? This study probes the overnight price differential rates and intraday returns of major stock indices from January 2010 to January 2025, challenging the Efficient Market Hypothesis (EMH). Using Rescaled Range Analysis and Multifractal Detrended Fluctuation Analysis, we uncover persistent overnight trends, signaling market inefficiencies, while intraday returns align closely with random walk behavior. Hierarchical clustering reveals market heterogeneity: emerging markets fuel trend-following opportunities, whereas developed markets favor mean-reversion strategies. These findings bolster the Fractal Market Hypothesis, offering fresh insights into volatility dynamics and cross-market risk transmission. For traders, the results unlock tailored strategies; for portfolio managers, they refine risk models; and for regulators, they highlight avenues for enhancing market transparency. This global analysis redefines our understanding of market efficiency, paving the way for advanced financial econometrics and strategic decision-making.

Suggested Citation

  • Si, Yuancheng & Nadarajah, Saralees, 2025. "Fractal insights into overnight and intraday returns: Unraveling global market heterogeneity," Finance Research Letters, Elsevier, vol. 85(PB).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pb:s1544612325012188
    DOI: 10.1016/j.frl.2025.107960
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