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

Gao, Ya and Han, Xing and Li, Youwei and Xiong, Xiong (2019): Overnight Momentum, Informational Shocks, and Late-Informed Trading in China.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: intraday momentum; overnight return; price jump; late-informed trading
• Subjects: G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; G - Financial Economics > G1 - General Financial Markets > G17 - Financial Forecasting and Simulation

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