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Overnight Momentum, Informational Shocks, and Late-Informed Trading in China

Author

Listed:
  • Gao, Ya
  • Han, Xing
  • Li, Youwei
  • Xiong, Xiong

Abstract

Based on high-frequency firm-level data, this paper uncovers new empirical patterns on intraday momentum in China. First, there exists a strong intraday momentum effect at the firm level. Second, the intraday predictability stems mainly from the overnight component rather than the opening half-hour component, which is consistent with the microstructure features of the Chinese market. Third, the intraday predictability attenuates (strengthens) following large positive (negative) informational shocks, implying a striking asymmetric reaction by market participants. Finally, we document that late-informed traders are relatively less experienced or skilful. Overall, the empirical results lend support to the model of late-informed trading.

Suggested Citation

  • Gao, Ya & Han, Xing & Li, Youwei & Xiong, Xiong, 2019. "Overnight Momentum, Informational Shocks, and Late-Informed Trading in China," MPRA Paper 96784, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:96784
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    File URL: https://mpra.ub.uni-muenchen.de/96784/1/MPRA_paper_96784.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    intraday momentum; overnight return; price jump; late-informed trading;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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