Abstract
By analyzing not only an overnight return but also a midday-recess return, namely, a stock return during midday-recess, I analyze whether and why market closures affect cross-sectional stock returns. I find strong persistence in overnight and midday-recess returns, with both returns positively associated with each other. Moreover, these out-of-trading-hours returns are negatively associated with returns during trading hours. I analyze whether these associations are explained by a different investor clientele outside trading hours (the open of the trading session) compared to during trading hours (intraday and closing of the trading session). I find that institutional ownership increases more with returns during trading hours; the finding indicates that those returns are mainly determined by institutional investors, while midday-recess and overnight returns, that is, returns outside trading hours, are not. Overall, my results support the view that market closures do affect cross-sectional returns and the influence is attributable to differences in the investor clientele.
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Notes
Since the FactSet Ownership database does not provide the number of shares owned by individual investors, which are representative of the opening clientele, I mainly analyze a change in institutional ownership during each period. However, since institutional investors are strongly concerned with liquidity and are regarded as representative of the closing clientele, the analysis can provide robust insights with respect to how my findings are explained by the investor-clientele argument.
The Stock Exchange of Thailand closes midday. Due to a small sample size and limited historical data, samples from Thailand are less suitable for my analysis. Nevertheless, I analyze Thailand stock markets as a robustness check. Details are shown in Sect. 4.3.2.
Due to space constraint, Table 6 reports associations with as much as 2 lags. The result still holds for the association with more lags.
Due to limited availability of ownership data, I do not perform the analysis regarding investor clientele for the Thailand sample.
Table 8(a), (b) report associations with up to 4 lags, as statistical significance of the association with lags greater than 4 is limited. However, the result is available upon request.
Since the analysis on investor clientele is monthly, and the ownership data is only available from 2004, I divide the period into three sub-periods, while in the case of analyzing the return associations, I divide it into four periods.
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Miwa, K. Market Closures and Cross-sectional Stock Returns. Asia-Pac Financ Markets 27, 1–33 (2020). https://doi.org/10.1007/s10690-019-09279-z
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DOI: https://doi.org/10.1007/s10690-019-09279-z