Abstract
Trading outside the main session occurs between 4:00PM-8:00PM and 4:00AM-9:30AM and is typically dominated by institutional investors, as retail investors are discouraged to trade in the extended trading hours. This study examines whether trading in the extended hours is predictive of future returns. It shows that on regular trading days, extended hours returns are negatively associated with returns in the Main trading session (9:30AM-4:00PM), consistent with extended hours trading that is induced by liquidity needs rather than information. In contrast, when significant new information is released during the extended hours sessions such as earnings, analyst recommendation changes, and SEC filings, the extended hours returns are positively and significantly associated with the following Main session returns, and even with long-term drift returns. The evidence is consistent with an under-reaction to information on news days, and suggests that the return reaction during extended trading hours can help predict the return drift after news events.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
