IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Think About Tomorrow Morning: Opening Stock Returns May Show Reversals

  • Andrey Kudryavtsev

    ()

    (The Max Stern Yezreel Valley Academic College)

In present study, I explore the dynamics of the interday stock price reversals. Employing intraday price data on thirty stocks currently making up the Dow Jones Industrial Index, I document that stock returns in opening trading sessions tend to be higher following days with relatively low (either negative, or lower than the same day's average and median for the total sample of stocks) open-to-close returns. This kind of price behavior seems to contradict stock market efficiency. Based on this finding, I construct three portfolios based on the opening trading sessions and involving a long position in the stocks on the days when their opening returns are expected to be high and a short position in the stocks on the days when their opening returns are expected to be low. All the portfolios are found to yield significantly positive returns, providing an evidence for the practical applicability of the "overnight reversals" pattern in stock prices.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.rejournal.eu/sites/rejournal.versatech.ro/files/articole/2013-12-01/1902/3.kudryavtsev.pdf
Download Restriction: no

Article provided by Department of International Business and Economics from the Academy of Economic Studies Bucharest in its journal Romanian Economic Journal.

Volume (Year): 16 (2013)
Issue (Month): 50 (December)
Pages: 51-64

as
in new window

Handle: RePEc:rej:journl:v:16:y:2013:i:50:p:51-64
Contact details of provider: Postal: 6 ROMANA PLACE, 70167 - BUCHAREST
Phone: 0040-01-2112650
Fax: 0040-01-3129549
Web page: http://www.rei.ase.ro/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Andrew W. Lo & Craig A. MacKinlay, . "An Econometric Analysis of Nonsyschronous-Trading," Rodney L. White Center for Financial Research Working Papers 19-89, Wharton School Rodney L. White Center for Financial Research.
  2. Robert J. Shiller, 1984. "Stock Prices and Social Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 15(2), pages 457-510.
  3. Kadlec, Gregory B & Patterson, Douglas M, 1999. "A Transactions Data Analysis of Nonsynchronous Trading," Review of Financial Studies, Society for Financial Studies, vol. 12(3), pages 609-30.
  4. Andrey Kudryavtsev, 2012. "Short-Term Stock Price Reversals May Be Reversed," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 5(3), pages 129-146, December.
  5. Jose Garcia Blandon, 2007. "Return autocorrelation anomalies in two European stock markets," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 22(1), pages 59-70, June.
  6. Cox, Don R & Peterson, David R, 1994. " Stock Returns Following Large One-Day Declines: Evidence on Short-Term Reversals and Longer-Term Performance," Journal of Finance, American Finance Association, vol. 49(1), pages 255-67, March.
  7. Jegadeesh, Narasimhan, 1990. " Evidence of Predictable Behavior of Security Returns," Journal of Finance, American Finance Association, vol. 45(3), pages 881-98, July.
  8. Sias, Richard W. & Starks, Laura T., 1997. "Return autocorrelation and institutional investors," Journal of Financial Economics, Elsevier, vol. 46(1), pages 103-131, October.
  9. Park, Jinwoo, 1995. "A Market Microstructure Explanation for Predictable Variations in Stock Returns following Large Price Changes," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(02), pages 241-256, June.
  10. Rhee, S. Ghon & Wang, Chi-Jeng, 1997. "The bid-ask bounce effect and the spread size effect: Evidence from the Taiwan stock market," Pacific-Basin Finance Journal, Elsevier, vol. 5(2), pages 231-258, June.
  11. Conrad, Jennifer S & Hameed, Allaudeen & Niden, Cathy, 1994. " Volume and Autocovariances in Short-Horizon Individual Security Returns," Journal of Finance, American Finance Association, vol. 49(4), pages 1305-29, September.
  12. Nam, Kiseok & Pyun, Chong Soo & Avard, Stephen L., 2001. "Asymmetric reverting behavior of short-horizon stock returns: An evidence of stock market overreaction," Journal of Banking & Finance, Elsevier, vol. 25(4), pages 807-824, April.
  13. Jain, Prem C. & Joh, Gun-Ho, 1988. "The Dependence between Hourly Prices and Trading Volume," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(03), pages 269-283, September.
  14. Kudryavtsev, Andrey, 2013. "Stock price reversals following end-of-the-day price moves," Economics Letters, Elsevier, vol. 118(1), pages 203-205.
  15. Stoll, Hans R & Whaley, Robert E, 1990. "Stock Market Structure and Volatility," Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 37-71.
  16. Robert J. Shiller, 1984. "Stock Prices and Social Dynamics," Cowles Foundation Discussion Papers 719R, Cowles Foundation for Research in Economics, Yale University.
  17. Amihud, Yakov & Mendelson, Haim, 1987. " Trading Mechanisms and Stock Returns: An Empirical Investigation," Journal of Finance, American Finance Association, vol. 42(3), pages 533-53, July.
  18. Scholes, Myron & Williams, Joseph, 1977. "Estimating betas from nonsynchronous data," Journal of Financial Economics, Elsevier, vol. 5(3), pages 309-327, December.
  19. Atchison, Michael D & Butler, Kirt C & Simonds, Richard R, 1987. " Nonsynchronous Security Trading and Market Index Autocorrelation," Journal of Finance, American Finance Association, vol. 42(1), pages 111-18, March.
  20. Gerety, Mason S & Mulherin, J Harold, 1994. "Price Formation on Stock Exchanges: The Evolution of Trading within the Day," Review of Financial Studies, Society for Financial Studies, vol. 7(3), pages 609-29.
  21. Perry, Philip R., 1985. "Portfolio Serial Correlation and Nonsynchronous Trading," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 20(04), pages 517-523, December.
  22. Bowman, Robert G. & Iverson, David, 1998. "Short-run overreaction in the New Zealand stock market," Pacific-Basin Finance Journal, Elsevier, vol. 6(5), pages 475-491, November.
  23. Tarun Chordia & Bhaskaran Swaminathan, 2000. "Trading Volume and Cross-Autocorrelations in Stock Returns," Journal of Finance, American Finance Association, vol. 55(2), pages 913-935, 04.
  24. Wood, Robert A & McInish, Thomas H & Ord, J Keith, 1985. " An Investigation of Transactions Data for NYSE Stocks," Journal of Finance, American Finance Association, vol. 40(3), pages 723-39, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:rej:journl:v:16:y:2013:i:50:p:51-64. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Radu Lupu)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.