IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2507.04481.html
   My bibliography  Save this paper

Does Overnight News Explain Overnight Returns?

Author

Listed:
  • Paul Glasserman
  • Kriste Krstovski
  • Paul Laliberte
  • Harry Mamaysky

Abstract

Over the past 30 years, nearly all the gains in the U.S. stock market have been earned overnight, while average intraday returns have been negative or flat. We find that a large part of this effect can be explained through features of intraday and overnight news. Our analysis uses a collection of 2.4 million news articles. We apply a novel technique for supervised topic analysis that selects news topics based on their ability to explain contemporaneous market returns. We find that time variation in the prevalence of news topics and differences in the responses to news topics both contribute to the difference in intraday and overnight returns. In out-of-sample tests, our approach forecasts which stocks will do particularly well overnight and particularly poorly intraday. Our approach also helps explain patterns of continuation and reversal in intraday and overnight returns. We contrast the effect of news with other mechanisms proposed in the literature to explain overnight returns.

Suggested Citation

  • Paul Glasserman & Kriste Krstovski & Paul Laliberte & Harry Mamaysky, 2025. "Does Overnight News Explain Overnight Returns?," Papers 2507.04481, arXiv.org.
    • Handle: RePEc:arx:papers:2507.04481
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2507.04481
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Akbas, Ferhat & Boehmer, Ekkehart & Jiang, Chao & Koch, Paul D., 2022. "Overnight returns, daytime reversals, and future stock returns," Journal of Financial Economics, Elsevier, vol. 145(3), pages 850-875.
    2. Lou, Dong & Polk, Christopher & Skouras, Spyros, 2019. "A tug of war: Overnight versus intraday expected returns," Journal of Financial Economics, Elsevier, vol. 134(1), pages 192-213.
    3. Hendershott, Terrence & Livdan, Dmitry & Rösch, Dominik, 2020. "Asset pricing: A tale of night and day," Journal of Financial Economics, Elsevier, vol. 138(3), pages 635-662.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lin, Chaonan & Chang, Hui-Wen & Chou, Robin K., 2023. "Overnight versus intraday returns of anomalies in China," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    2. De Rossi, Giuliano & Steliaros, Michael, 2022. "The Shift from Active to Passive and its Effect on Intraday Stock Dynamics," Journal of Banking & Finance, Elsevier, vol. 143(C).
    3. Hajiyev, Aghamehman & Keiber, Karl Ludwig & Luczak, Adalbert, 2024. "Tug of war with noise traders? Evidence from the G7 stock markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 234-243.
    4. Yang, Ge & Yin, Ximing, 2024. "Stock price delay and the cross-section of expected returns: A story of night and day," International Review of Economics & Finance, Elsevier, vol. 96(PB).
    5. Kang, Junqing & Lin, Shen & Xiong, Xiong, 2022. "What drives intraday reversal? illiquidity or liquidity oversupply?," Journal of Economic Dynamics and Control, Elsevier, vol. 136(C).
    6. Insana, Alessandra, 2022. "Does systematic risk change when markets close? An analysis using stocks’ beta," Economic Modelling, Elsevier, vol. 109(C).
    7. Sreekha Pullaykkodi & Rajesh H. Acharya, 2024. "The Effects of Overnight Events on Daytime Return: A Market Microstructure Analysis of Market Quality," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 31(3), pages 497-542, September.
    8. Aparna Bhat & Piyush Pandey & S. V. D. Nageswara Rao, 2024. "The asymmetry in day and night option returns: Evidence from an emerging market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(8), pages 1320-1337, August.
    9. Cynthia M. Gong & Di Luo & Huainan Zhao, 2021. "Liquidity risk and the beta premium," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 44(4), pages 789-814, December.
    10. Qi Cui & Tianhong Zhao & Tingyue Cui, 2023. "Macroeconomic Announcements: How Announcements Shape Trading Strategies," SAGE Open, , vol. 13(4), pages 21582440231, December.
    11. Insana, Alessandra, 2023. "Betting against beta with intraday and overnight signals," International Review of Financial Analysis, Elsevier, vol. 86(C).
    12. Akbas, Ferhat & Boehmer, Ekkehart & Jiang, Chao & Koch, Paul D., 2022. "Overnight returns, daytime reversals, and future stock returns," Journal of Financial Economics, Elsevier, vol. 145(3), pages 850-875.
    13. Saadon, Yossi & Schreiber, Ben Z., 2023. "Newspapers tone and the overnight-intraday stock return anomaly," Journal of Financial Markets, Elsevier, vol. 65(C).
    14. Guo, Jiaqi & Han, Xing & Li, Kai & Li, Youwei, 2025. "The nexus of overnight trend and asset prices in China," Journal of Economic Dynamics and Control, Elsevier, vol. 170(C).
    15. Barardehi, Yashar H. & Bernhardt, Dan & Da, Zhi & Warachka, Mitch, 2022. "Institutional Liquidity Demand and the Internalization of Retail Order Flow : The Tail Does Not Wag the Dog," The Warwick Economics Research Paper Series (TWERPS) 1394, University of Warwick, Department of Economics.
    16. Yuan, Xianghui & Long, Jun & Li, Xiang & Zhao, Chencheng, 2025. "Asymmetric connectedness in the Chinese stock sectors: Overnight and daytime return spillovers," Pacific-Basin Finance Journal, Elsevier, vol. 89(C).
    17. Chan, Kam Fong & Marsh, Terry, 2022. "Asset pricing on earnings announcement days," Journal of Financial Economics, Elsevier, vol. 144(3), pages 1022-1042.
    18. Baltussen, Guido & Da, Zhi & Lammers, Sten & Martens, Martin, 2021. "Hedging demand and market intraday momentum," Journal of Financial Economics, Elsevier, vol. 142(1), pages 377-403.
    19. Wang, Cheng & Bouri, Elie & Xu, Yahua & Zhang, Dingsheng, 2023. "Intraday and overnight tail risks and return predictability in the crude oil market: Evidence from oil-related regular news and extreme shocks," Energy Economics, Elsevier, vol. 127(PB).
    20. Bogousslavsky, Vincent, 2021. "The cross-section of intraday and overnight returns," Journal of Financial Economics, Elsevier, vol. 141(1), pages 172-194.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2507.04481. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.