Abstract
ABSTRACT In this study, we decompose daily stock return into day and night returns and examine whether stock prices follow random walk over day and night in the Chinese stock market. Both variance ratio test and economic test reject the random walk hypothesis. Specifically, we find a significant return reversal from night to day but a significant return momentum from day to night. We also show that the unique T + 1 trading rule in China attenuates the return reversal from night to day but strengthens the return momentum from day to night.
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