Asymmetric attention and asymmetric overnight momentum in China’s stock market

We investigate an interesting phenomenon that the overnight return is significantly negative on days with lagged negative intraday return in China, while the overnight return is non-negative on days with lagged positive intraday return, which is labelled as asymmetric overnight momentum. We explain this phenomenon from the perspective of asymmetric attention theory. We employ novel manually collected data on investor attention, which is the number of online posts at the firm-day level sourced from a popular Chinese stock message board. The empirical evidence suggests that investors respond more strongly to bad news than good news, which leads to short-term overreaction on negative return days and asymmetric overnight momentum. This paper provides new insights into the mechanisms underlying the asymmetric overnight momentum.