Daytime Returns Research Articles

A leader of the world commodity futures markets in the making? The case of China's commodity futures

We use the daily data of 16 commodity futures contracts traded in China and corresponding foreign markets (the US, the UK, Japan, and Malaysia) to analyze the linkages between markets. Several findings are noteworthy. First, trading returns of foreign markets, such as the US, have significant impact on China's overnight (close-to-open) returns and vice-versa. Second, daytime (open-to-close) returns of many Chinese commodity futures contracts are not led by foreign daytime returns. Finally, the close-to-close returns analysis suggests that there are no significant lead-lag relationships between the Chinese and foreign markets. These results suggest that (1) the Chinese commodity futures markets are information-efficient, and (2) they are likely to be driven by local market dynamics occurring during the daytime trading session.

The overnight effect on the Taiwan stock market

This study examines statistical regularities among three components of stocks and indices: daytime (trading hour) return, overnight (off-hour session) return, and total (close-to-close) return. Owing to the fact that the Taiwan Stock Exchange (TWSE) has the longest non-trading periods among major markets, the TWSE is selected to explore the correlation among the three components and compare it with major markets such as the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation (NASDAQ). Analysis results indicate a negative cross correlation between the sign of daytime return and the sign of overnight return; possibly explaining why most stocks feature a negative cross correlation between daytime return and overnight return [F. Wang, S.-J. Shieh, S. Havlin, H.E. Stanley, Statistical analysis of the overnight and daytime return, Phys. Rev. E 79 (2009) 056109]. Additionally, the cross correlation between the magnitude of returns is analyzed. According to those results, a larger magnitude of overnight return implies a higher probability that the sign of the following daytime return is the opposite of the sign of overnight return. Namely, the predictability of daytime return might be improved when a stock undergoes a large magnitude of overnight return. Furthermore, the cross correlations of 29 indices of worldwide markets are discussed.

Information Transmission between Nighttime Trading and Daytime Trading: Evidence from KOSPI 200 Futures

Trading of KOSPI 200 futures on CME Globex platform, which was launched in November 2009, starts at 18:00 and closes at 05:00 in the next morning. This paper investigates the information transmission between daytime trading of KOSPI 200 futures on KRX and nighttime trading of KOSPI 200 futures on CME Globex by using GARCH (1, 1). The main findings of this paper are summarized as followings; Firstly, the statistically significant spillover effect from open-to-close returns of KOSPI 200 Futures on Globex to the overnight returns of KOSPI 200 futures on KRX is found but not to the daytime returns. Moreover, I find the spillover effects from daytime returns of KOSPI 200 futures on KRX to close-to-open return and open-to-close return of KOSPI 200 Futures on Globex. Meanwhile, this information transmission between two markets of common underlying asset shows more strongly statistical significance during highly liquid period. Secondly, daytime traders of KOSPI 200 futures on KRX recognize the price of KOSPI 200 futures on CME Globex as more valuable information than volatility of US stock market. Overall empirical evidence suggests that KOSPI 200 futures on CME Globex has leading role in price discovery process of daytime trading of KOSPI 200 futures on KRX despite of immaturity and low liquidity.

Overnight News and Daily Equity Trading Risk Limits

This paper proposes a new bivariate modeling approach for setting daily equity-trading risk limits using high-frequency data. We construct one-day-ahead Value-at-Risk (VaR) forecasts by taking into account the different dynamics of the overnight and daytime return processes and their covariance. The covariance is motivated by market microstructure effects such as price staleness and news spillover. Among the competitors we include a simpler bivariate model where the overnight return is redefined by moving the open price further into the trading day, and a univariate model based on the close-to-close return and an overnight-adjusted realized volatility. We illustrate the different approaches using data on the S&P 500 and Russell 2000 indices. The evidence in favour of modeling the covariance is more convincing for the latter index due to the lower trading volumes and, relatedly, the less efficient price discovery at market open for small-cap stocks.

(Study on the Impact of Us Stock Market's Shock Due to Global Financial Crisis on Korean Financial Markets)

Korean Abstract: 본 연구는 글로벌 금융위기에 따른 미국 주식시장의 충격이 한국 금융시장 특히 주식 및 외환시장에 미친 영향을 분석하였다. 특히 글로벌 금융위기 기간과 금융위기 전후 기간을 비교하였으며, 전체 주식시장뿐만 아니라 금융업종(은행, 증권, 보험)에 미친 영향도 함께 분석하였다. 분석방법으로는 GARCH 모형과 GJR-GARCH 모형을 이용하여 대칭적 - 비대칭적 정보 전이효과를 함께 분석하였다. 분석 결과 첫째, 미국 주식시장의 주가변동이 한국 주식시장의 야간수익률에 유의한 양( )의 영향을, 주간수익률에는 금융위기 기간에서만 유의한 음(-)의 영향을 미치고 있다. 또한 미국 주식시장과 한국 주식시장 간에는 비대칭적 전이효과가 존재하는 것으로 나타나고 있다. 둘째, 미국 주식시장의 주가변동이 한국 외환시장 원달러환율의 야간수익률에 유의한 음(-)의 영향을 미치고 있으나, 주간수익률에는 유의한 영향이 없었다. 또한, 금융위기를 거치면서 미국 주식시장에서 한국 원달러환율의 야간수익률에 대한 전이효과는 증가한 것으로 나타났다. 셋째, 미국 주식시장의 주가변동이 개별 금융업종에 미친 영향을 분석한 결과 주식시장 전체에 미친 영향보다 더 큰 영향을 미친 것으로 나타났다. 넷째, 미국 주식시장 주가변동은 한국 주식시장에서의 외국인 순매매와 높은 양( )의 상관관계를 보이고 있으며, 이러한 관계는 금융위기를 거치면서 더욱 증가하였다. 또한 국내 주식시장에서의 외국인 순매매는 주가수익률과 유의한 양( )의 관계를 가지는 반면, 원달러환율과는 유의한 음(-)의 상관관계를 보이고 있으며, 금융위기를 거치면서 국내 금융시장에서 외국인의 역할이 더욱 증대되고 있는 것으로 나타났다. 결국 금번 글로벌 금융위기에서 미국 주식시장의 충격이 한국 금융시장에 커다란 영향을 미쳤으며, 그 과정에서 외국인 자금이탈이 커다란 역할을 했음을 알 수 있다. English Abstract: Study on the impact of US stock market’s shock due toWe empirically examined the spillover effects of US stock market on Korean stock and foreign exchange market during the global financial crisis. The time period of this study was divided into three periods that are global financial crisis period and pre- and post crisis period. Using the methodology of GARCH and GJR-GARCH, we examined symmetric and asymmetric information spillover effect. The major empirical findings are as follow: First, the spillover effect of US stock market on the overnight return of Korean stock market was statistically significant positive, and spillover effect on daytime return was significant negative only during the financial crisis period. Second, the spillover effect of US stock market on Won/dollar overnight return in Korea was statistically significant negative, but impact on its daytime return was not significant. Third, the impact of US stock market on Korean financial industries’ stock index(banks, securities, insurance) was arger than Korean total stock market index. Fourth, there was relatively high positive correlation between the change in US stock index and the foreign investors' net sales in Korean stock market. The foreign investors’ net sales in Korean stock market has positive correlation with the return of Korean stock market and has negative correlation with the return of Won/dollar exchange rate. These relations are stronger throughout the financial crisis. As a results, foreign investors has a important role in the contagion process of financial crisis in Korean financial market. global financial crisis on Korean financial markets.

Out of the dark: Diurnal activity in the bat Hipposideros ruber on São Tomé island (West Africa)

Geographical areas historically characterized by a lower risk of diurnal avian predation should in theory allow bats to be active in daytime too, especially to forage. Oceanic islands are ideal for studying temporal niche shifts in bats since they often feature depauperate avian assemblages with fewer birds of prey. We report on the second case of diurnal activity known for an insular insectivorous bat, Hipposideros ruber on the island of São Tomé (Gulf of Guinea). We present observations of daylight flights made at several sites on the island in six months (from July to November and in January). We also carried out daytime (09h00–16h00) emergence counts at three roosts. In this time interval, bats were continuously active, although activity rates changed: bats tended to return to roosts in early afternoon and, at two sites, to decrease emergence rate under intense light probably to reduce the risk of hyperthermia. At one roost, we observed that heavy rain caused abrupt daytime returns of large numbers of bats. In daytime bats did forage and kept echolocating. Social interactions (chases) were also frequently observed. In daytime adult males were significantly more frequent than females, while the opposite was noticed at night, an intersexual segregation possibly leading to temporal niche partitioning.

Modelling Overnight and Daytime Returns Using a Multivariate Garch-Copula Model

We introduce a multivariate GARCH-Copula model to describe joint dynamics of overnight and daytime returns for multiple assets. The conditional mean and variance of individual overnight and daytime returns depend on their previous realizations through a variant of GARCH specification, and two Student's t copulas describe joint distributions of both returns respectively. We employ both constant and time-varying correlation matrices for the t copulas and with the time-varying case the dependence structure of both returns depends on their previous dependence structures through a DCC specification. We estimate the model by a two-step procedure, where marginal distributions are estimated in the first step and copulas in the second. We apply our model to overnight and daytime returns of SPDR ETFs of nine major sectors and briefly illustrate its use in risk management and asset allocation. Our empirical results show higher mean, lower variance, fatter tails and lower correlations for overnight returns than daytime returns. Daytime returns are significantly negatively correlated with previous overnight returns. Moreover, daytime returns depend on previous overnight returns in both conditional variance and correlation matrix (through a DCC specification). Most of our empirical findings are consistent with the asymmetric information argument in the market microstructure literature. With respect to econometric modelling, our results show a DCC specification for correlation matrices of t copulas significantly improves the fit of data and enables the model to account for time-varying dependence structure.

Modelling Overnight and Daytime Returns Using a Multivariate GARCH-Copula Model

We introduce a multivariate GARCH-Copula model to describe joint dynamics of overnight and daytime returns for multiple assets. The conditional mean and variance of individual overnight and daytime returns depend on their previous realizations through a variant of GARCH specification, and two Student’s t copulas describe joint distributions of both returns respectively. We employ both constant and time-varying correlation matrices for the t copulas and with the time-varying case the dependence structure of both returns depends on their previous dependence structures through a DCC specification. We estimate the model by a two-step procedure, where marginal distributions are estimated in the first step and copulas in the second. We apply our model to overnight and daytime returns of SPDR ETFs of nine major sectors and briefly illustrate its use in risk management and asset allocation. Our empirical results show higher mean, lower variance, fatter tails and lower correlations for overnight returns than daytime returns. Daytime returns are significantly negatively correlated with previous overnight returns. Moreover, daytime returns depend on previous overnight returns in both conditional variance and correlation matrix (through a DCC specification). Most of our empirical findings are consistent with the asymmetric information argument in the market microstructure literature. With respect to econometric modelling, our results show a DCC specification for correlation matrices of t copulas significantly improves the fit of data and enables the model to account for time-varying dependence structure.

Intraday linkages between the Spanish and the US stock markets: evidence of an overreaction effect

This paper focuses on short-term information transmission between the US stock market, properly the DOW index, and the main Spanish stock index, IBEX-35, in its early and final hours. We follow the approaches of Lin, Engle and Ito (1994), Susmel and Engle (1994) and Baur and Jung (2005) who use a GARCH model to analyze the influence of the previous daytime and overnight returns and volatility of the DOW upon the overnight returns and daytime returns of the IBEX from Open-to-3:30 and from 3:30-to-Close. The results suggest that the Spanish stock market usually has a low price movement till Wall Street opens. Additionally, they indicate that the Spanish market reacts quickly to the news, basically in the first four minutes following the opening of the US market. Furthermore, we find the existence of an overreaction effect during the two hours before the closing of the Spanish market.

Market Microstructure and Private Information: A Study on National Stock Exchange of India

This paper is an attempt to examine the impact of changes in market microstructure on stock return variances during exchange trading and nontrading hours for a sample of stocks listed in National Stock Exchange of India. The study has found that daytime return variance is higher than overnight return variance and opening return variance is higher than closing return variance. First order autocorrelations in opening returns have shown small but significant negative autocorrelations for more companies whereas closing returns have shown significant positive autocorrelation for few companies. Speed of adjustment estimated from opening returns has shown a tendency towards overreaction whereas closing returns have shown a tendency towards under reaction.

Statistical analysis of the overnight and daytime return

We investigate the two components of the total daily return (close-to-close), the overnight return (close-to-open), and the daytime return (open-to-close), as well as the corresponding volatilities of the 2215 New York Stock Exchange stocks for the 20 year period from 1988 to 2007. The tail distribution of the volatility, the long-term memory in the sequence, and the cross correlation between different returns are analyzed. Our results suggest that (i) the two component returns and volatilities have features similar to that of the total return and volatility. The tail distribution follows a power law for all volatilities, and long-term correlations exist in the volatility sequences but not in the return sequences. (ii) The daytime return contributes more to the total return. Both the tail distribution and the long-term memory of the daytime volatility are more similar to that of the total volatility, compared to the overnight records. In addition, the cross correlation between the daytime return and the total return is also stronger. (iii) The two component returns tend to be anticorrelated. Moreover, we find that the cross correlations between the three different returns (total, overnight, and daytime) are quite stable over the entire 20 year period.

Transitory Price Changes in the Chinese Stock Markets

This paper examines opening and closing return patterns on the Chinese stock markets. We find that open-to-open returns are significantly more volatile than close-to-close returns. In addition, the correlation of the overnight return with the following daytime return is significantly negative, while the correlation of the daytime return with the following overnight return is strongly positive. The results show strong price continuation around the close and strong price reversal at the open, and the findings are not sensitive to trading volume. The findings are less likely to be caused by price limits. Our results are inconsistent with previous findings from the Tokyo Stock Exchange, yet similar to those from the New York Stock Exchange, albeit under a different market structure.

Measuring equity market integration using uncorrelated information flows: Tokyo, London and New York

Equity markets do not pass all overnight information into prices instantly at the opening of trade. We adjust open-to-close return series for non-instantaneous information absorption and then use adjusted series to measure integration among three major equity markets. Because the adjusted daytime return series are uncorrelated, we can accurately measure the size, and identify the sources, of transmissions. Overnight news, as represented by foreign open-to-close returns, explains 13% of opening price variation (close-to-open returns) in New York, 14% in Tokyo and 30% in London. For New York and Tokyo, the largest influences come from the market that trades immediately prior (London and New York respectively) whereas opening price variation in London is linked closer with New York than Tokyo. Foreign volatility spillovers are also significant, and subject to asymmetric effects.

Information Processing and Measures of Integration: New York, London and Tokyo

Equity markets do not pass all overnight information into prices instantaneously at the opening of trade. The New York market takes up to 30 minutes after the opening time to absorb overnight foreign news, Tokyo takes about 90 minutes, and London about 120 minutes on average. These delays in information absorption are not commercially significant but do have implications for measures of market integration. We adjust intra-daily return series for non-instantaneous news absorption and then use adjusted series to predict opening price variation in three major equity markets. Because the adjusted daytime returns series are uncorrelated, we can accurately measure the size, and identify the sources, of transmissions. Overnight news, as represented by foreign daytime returns, explains 12% of opening price variation (close-open returns) in New York, 14% in Tokyo and 30% in London. For New York and Tokyo, the largest influences come from the market that trades immediately prior (London and New York respectively) whereas opening price variation in London is linked closer with New York than Tokyo. Foreign volatility spillovers are also significant, and subject to asymmetry effects.

Return and volatility linkages between the US and the German stock market

This study investigates the contemporaneous correlation and the spillover effects between the US and the German stock markets around the opening of the two markets. It is based on a newly compiled sample of intra-day data for the two blue chip indices, the Dow Jones Industrial Average (DOW) and the Deutsche Aktienindex (DAX). Our main findings are as follows: foreign daytime returns can significantly influence the domestic overnight returns; this holds for both the US and the German market; there is no evidence of spillovers from the previous daytime returns in the US to the DAX morning trading; short-lived mean spillovers, especially from the DAX noon-to-3:30 pm (CET) segment into the DOW, can be identified; and the uncritical use of the DAX opening quote is very likely to produce spurious results due to institutional peculiarities. To avoid this problem we propose a proxy for the DAX opening that appears satisfactory.

The Relationship between Returns and Trading Volume: Preliminary Evidence Concerning Taiwan Index Futures Contracts

This paper examines the causal relationship between returns and volume for four Taiwanrelated futures contracts and the co-movement between returns and volume. The findings were as follows: First, past returns could predict the volume for the SIMEX-TW contract; however, a significant lagged volume Granger-caused returns for TF contracts. Second, regarding trading period returns and volume, it was found that volume could be used to forecast returns for TE contracts. There exists a feedback relationship for TF contracts. Third, the study found evidence of significant transitory and permanent covariances except in the case of TX contracts when the close-to-close returns were considered. Fourth, results concerning the covariance between day-time returns and volume corresponded to rejection of the null hypotheses of a zero unconditional covariance (ZUC) and a zero conditional covariance (ZCC); but only in the case of the TE contracts did the author find evidence of ZUC.

Do bears and bulls swim across oceans? Market information transmission between greater China and the rest of the world

This study investigates returns and volatilities transmission across Greater China’s four emerging stock markets and three developed international markets, Tokyo, London, and New York. Using daily open and close price data from 1994 to 2001, we provide empirical evidence that the overnight returns on all the Greater China stock indices can be estimated by using information from at least one of the three developed markets’ daytime returns. The contemporaneous return spillovers are in general unidirectional from more advanced major international markets to the Chinese markets. However, split-sample analysis suggests that there is also evidence of bi-directional return spillovers after the 1997 Asian financial crisis. We also find that there are no one-period lagged return spillover effects from the three advanced markets to the Chinese markets, except for Taiwan. Finally, Mainland China’s two stock markets are not affected by contemporaneous nor delayed “bad news”.

Do Bulls and Bears Swim Across Oceans? Market Information Transmission between Greater China and the Rest of the World

This study investigates returns and volatilities transmission across Greater China's four emerging stock markets and three developed international markets, Tokyo, London, and New York. Using daily open and close price data from 1994 to 2001, we provide empirical evidence that the overnight returns on all the Greater China stock indices can be estimated by using information from at least one of the three developed markets' daytime returns. The contemporaneous return spillovers are in general unidirectional from more advanced major international markets to the Chinese markets. However, split-sample analysis suggests that there is also evidence of bi-directional return spillovers after the 1997 Asian financial crisis. We also find that there are no one-period lagged return spillover effects from the three advanced markets to the Chinese markets, except for Taiwan. Finally, Mainland China's two stock markets are not affected by contemporaneous nor delayed bad news.

A Study on Information Spillover Effects from NASDAQ 100 to KOSDAQ 50 Index Futures Markets

This paper studies the information spillover effects over price and volatility across countries by using open-to-close (daytime) returns and close-to-open (overnight) returns of NASDAQ 100 and KOSDAQ 50 index futures data from January 1, 2001 to December 31, 2001. Based on the time-varying AR(1)-GARCH (1,1)-M models, we document that statistically significant conditional mean and volatility spillover effects from the daytime returns of NASDAQ 100 index futures to both overnight returns and daytime returns of KOSDAQ 50 index futures were observed. We also find that there were information spillover effects from overnight returns of NASDAQ 100 index futures to daytime returns of KOSDAQ 50 index futures returns because investors in Korean stock markets can get information on U.S. stock market movement on real time basis due to the ECN transaction with its trading hour overlapped. Finally, we find that the daytime returns of KOSDAQ 50 index futures significantly influence the overnight and daytime returns of the NASDAQ 100 index futures.

Influence of daylight and noise current on cloud and aerosol observations by spaceborne elastic scattering lidar

The influence of daylight and noise current on cloud and aerosol observations by realistic spaceborne lidar was examined by computer simulations. The reflected solar radiations, which contaminate the daytime return signals of lidar operations, were strictly and explicitly estimated by accurate radiative transfer calculations. It was found that the model multilayer cirrus clouds and the boundary layer aerosols could be observed during the daytime and the nighttime with only a few laser shots. However, high background noise and noise current make it difficult to observe volcanic aerosols in middle and upper atmospheric layers. Optimal combinations of the laser power and receiver field of view are proposed to compensate for the negative influence that is due to these noises. For the computer simulations, we used a realistic set of lidar parameters similar to the Experimental Lidar in-Space Equipment of the National Space Development Agency of Japan.