Abstract
The traditional financial framework theorizes a positive mean-variance relation, which, however, is not fully supported by empirical evidence. We provide a new explanation for the weak mean-variance relation by separately testing the relation overnight and intraday. Results at the global level present a positive mean-variance relation overnight but a negative relation intraday, while results of individual markets reveal a high degree of heterogeneity. We employ cultural dimensions, market integrity, and market development to examine the drivers of the observed cross-market differences, showing that all the three factors influence the mean-variance relation, and notably, the influence varies across night and day.
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