The Cross-Section of Intraday and Overnight Returns

Abstract

Using a thirty-year sample of intraday returns on U.S. stocks, I show that asset pricing anomalies accrue over the day in radically different ways. Size and illiquidity premia are realized in the last thirty minutes of trading. Furthermore, the turnover of small stocks relative to that of large stocks spikes around the close. This evidence can be explained by a model in which liquidity deteriorates before the close. Other anomalies, such as profitability and idiosyncratic volatility, accrue gradually throughout the trading day but incur large negative returns overnight. The evidence is consistent with mispricing at the open.