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Is The Risk Of The Opening Price Gap Priced?

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  • Araújo, Gustavo Silva
  • BARBEDO, Claudio Henrique
  • Costa, Hugo Araújo
  • Baruque, Aziz

Abstract

This study investigates whether the risk associated with the opening price gap rate, defined as the difference between a stock’s closing price and its subsequent opening price, is priced in the Brazilian equity market. Recognizing that investors are directly affected by the volatility of these gaps, we simulate long–short strategies using stocks sorted by overnight volatility. Empirical results demonstrate that such strategies consistently yield positive abnormal returns across all conventional asset pricing models. These findings suggest that gap risk is not incorporated into asset prices in the Brazilian market, highlighting an inefficiency that may be exploited by investors.

Suggested Citation

  • Araújo, Gustavo Silva & BARBEDO, Claudio Henrique & Costa, Hugo Araújo & Baruque, Aziz, 2026. "Is The Risk Of The Opening Price Gap Priced?," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 80(1), March.
    • Handle: RePEc:fgv:epgrbe:v:80:y:2026:i:1:a:94803
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