Abstract
We verify the existence of firm-level “intraday return vs. overnight return” pattern and overnight-intraday effect of nine financial anomalies of Chinese energy industry stocks of the Chinese stock market. Though energy finance has been an independent research area, we also take Chinese A-shares stocks as samples for empirical analysis to avoid the so-called sample selection bias. Specifically, it verifies that the overnight returns are strongly negative and intraday returns are positive for energy industry stocks, which is totally contrary to the American stock markets. In addition, alphas of the zero-cost strategies based on nine classic financial anomalies are almost earned at night for energy industry stocks. Finally, it is risk-related anomalies that occur overnight for energy industry stocks, while both four risk-related anomalies and two firm characteristics related anomalies occur at night for all A-shares stocks. Our empirical findings based on Chinese financial markets enrich the existing research on the mispricing of financial anomaly and shed a new sight on the asset pricing in energy finance.
Highlights
The empirical analysis of the existence and mechanism of financial anomalies have always attracted much attention from scholars
The potential contributions of this paper are as follows: at first, it is a nature point that we investigate the overnight-intraday effect of trading strategies in the energy industry, and as far as we know, we are the first to empirically test which financial anomaly belongs to overnight effect or intraday effect in the energy industry stocks as well as in A-shares stocks
Trading strategies are constructed to capture the alpha associated with trading at night or during the day, and thereby we should first test the persistence in the components of close-to-close return
Summary
The empirical analysis of the existence and mechanism of financial anomalies have always attracted much attention from scholars. Hou et al (2015a), Hou et al (2015b) examined 73 anomalies, such as the total volatility, idiosyncratic volatility, and systematic volatility in Ang et al (2006), the failure probability in Campbell et al (2008), the dispersion of analysts’ earnings forecasts in Diether et al (2002), the total accrual in Richardson et al (2005), and the illiquidity in Amihud (2002) They concluded that their q-factor model consisting of the market factor, a size factor, an investment factor, and a profitability. We verify the existence of firm-level “intraday return vs overnight return” pattern and overnight-intraday effect of nine financial anomalies in the energy industry market.
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