Trading Hours Research Articles

Commentary on Kypri & Livingston (2020): Alcohol trading hour restrictions reduce assault incidence.

Commentary on Kypri & Livingston (2020): Alcohol trading hour restrictions reduce assault incidence.

Does earnings surprise determine the timing of the earnings announcement? Evidence from earnings announcements of Indian companies

PurposeThe purpose of this study is to investigate whether the earnings surprise influences decision to make earnings announcements during or after the trading hours is influenced by the earnings surprise resulting from the difference between consensus earnings estimates and the actual reported earnings.Design/methodology/approachEvent study methodology was employed to test the hypotheses relating to earnings surprise and timing of earnings announcements. Twelve quarterly earnings announcements of 30 companies, drawn from BSE SENSEX of India, were studied to test the hypothesized relationships.FindingsThe study has found statistically significant differences in the market responses to the earnings announcements made during and after the trading hours. The market demonstrated a negative response to the earnings announcements made after the trading hours. Further, the results of the logistic regression have shown that the presence of significant earnings surprises is likely to induce firms to make earnings announcements after the trading hours. The results indicate that those firms that intend to reduce the overreaction and underreaction to earnings surprises are likely to make earnings announcements after the trading hours.Originality/valueThis paper highlights the market response to the earnings announcement made during and after the regular trading hour. Further, the paper examines if the earnings surprise influences the decision to announce the results.

Asymmetric information linkages across select futures and spot indices

PurposeThe study investigates the amplitude and direction of the movement of information between spot and futures indices. The study progresses to account for the investor's heterogeneity and compare the evolving structure of investors in emerging and developed economies. Further, the structural linkages in terms of returns and variance have been explored for the futures indices to contribute to meteor shower literature as explained by Engle et al. (1990); Yarovaya et al. (2017).Design/methodology/approachTo facilitate the purpose, the Indian and Chinese markets were selected to represent emerging economies and the United States for developed one. The bivariate wavelet cum BEKK-GARCH (1,1) model was estimated.FindingsFor the developed markets, like the United States, the spot market improves its information transmission role with time horizon while exactly opposite holds for the Chinese market. A bidirectional overnight information spillover was found for all three pairs. The Indian futures market was vulnerable to bad news from the other two markets. Evidence suggesting the dominance of institutional investors in the Chinese futures market and retail investors in the Indian futures market is found.Originality/valueThe spot–futures relation has been studied on both the time and frequency domains considering different investment horizons. Due consideration has been taken to account for the overlapping trading hours.

Incidence of assault in Sydney, Australia, throughout 5 years of alcohol trading hour restrictions: controlled before-and-after study.

In February 2014, pubs and bars in Kings Cross (KX) and the central business district (CBD) of Sydney, Australia were required to stop serving alcohol by 3a.m. and operate a 'lockout' from 1.30a.m. We studied changes in the incidence of assault during the following 5years, including possible displacement. Controlled before-and-after ecological study. Sydney, Australia. Assaults in specified areas in which police apprehended at least one person. We compared change in non-domestic assault in KX and the CBD with adjacent areas, other city areas, and outer suburbs, adjusting for the trend in the rest of the state during three periods: 6 p.m.-1.29 a.m. ('pre-lockout'), 1.30 a.m.-2.59 a.m. ('lockout') and 3 a.m.-6 a.m. ('after last-drinks'). We constructed interrupted time-series models with terms for secular trend and season, producing incidence rate ratios (IRR) for step and slope parameters. We performed sensitivity analyses on impacts of missing location data. After the intervention, assaults fell 38% in KX (IRR for step change=0.62, 95% CI=0.49, 0.79) and 10% in the CBD (IRR=0.90, 95% CI=0.80, 0.99). Assaults continued declining in KX (IRR for slope=0.990, 95% CI=0.982, 0.998) and later increased in adjacent areas (IRR for slope=1.006, 95% CI=1.001, 1.011) and earlier in the evenings in both KX and the adjacent areas. The net reduction was 627 assaults over 60months post-intervention, i.e. 10 fewer per month. Estimates were robust to extreme assumptions about missing data. The 2014 alcohol supply restrictions for pubs and bars in Kings Cross (KX) and the central business district (CBD) of Sydney, Australia were followed by a substantial reduction in the incidence of assault in KX and to a lesser extent in the CBD, possibly displacing some cases to adjacent areas and earlier in the evening.

Reduction in Late-Night Violence following the Introduction of National New Zealand Trading Hour Restrictions.

This study aimed to assess the early impact of national alcohol trading hour restrictions on nighttime violence in New Zealand. The new national maximum trading hour restrictions prohibited 24-hour trading by reducing hours to between 8 am and 4 am for on-premises and between 7 am and 11 pm for take-away outlets. A telephone survey of alcohol outlets was undertaken to determine actual trading hours before the law change. Interrupted time-series analysis modeled weekly nighttime police calls for service for assault (i.e., between 9 pm and 6 am) and late-night police calls for service for assault (i.e., between 4 am and 6 am) from 2005 to 2015. Daytime police calls for service for assaults were used as the comparison group. Abrupt permanent changes and gradual permanent changes were assessed. The survey found that only 1% of alcohol shops, 9% of supermarkets, and 6% of bars/nightclubs were affected by the hour restrictions because they did not trade as long as their licensed hours permitted in the first place. The time-series analysis found no effect of the national trading hour restrictions on nighttime police calls for service for assaults. However, a significant gradual permanent decrease of 12.4% was found for late-night assaults between 4 am and 6 am (i.e., those likely related to the on-premises hour restriction). This equated to a weekly average decrease of 4.3 police calls for service for assaults between 4 am and 6 am following the law change. The national trading hour restrictions for on-premises and take-away outlets affected only a small proportion of premises, and no change in the overall level of nighttime violence was found following the restrictions. Late-night assaults likely related to on-premises, however, did reduce showing the likely effectiveness of trading hour restrictions even when the impact of the law change on the ground was minimal.

Foreign Exchange Fixings and Returns Around the Clock

Nous mettons en lumiere un nouveau resultat empirique concernant le marche des changes : les rendements qui y sont degages connaissent systematiquement un mouvement d’inversion autour du moment ou les taux de reference sont etablis. Plus precisement, on remarque que, en moyenne, le dollar americain s’apprecie au cours des heures precedant l’etablissement des taux de reference et qu’il se deprecie apres.

Impact of stock market trading on currency market volatility spillovers

This research aims to detect the volatility linkages among various currencies during operating and non-operating hours of three major stock markets (Tokyo, London and New York) by employing bivariate VAR-BEKK-GARCH model in selected currency pairs. In particular, the aim is to analyze whether the major stock markets have a differential impact on volatility linkages in currency markets. The results indicate that volatility linkages in intraday are far stronger then in daily results. One remarkable result is that rather than major currencies, some minor and exotic currencies play a leading role in volatility transmission during trading hours of major stock markets.

Effects of Extensions and Restrictions in Alcohol Trading Hours on the Incidence of Assault and Unintentional Injury: Systematic Review

We undertook a systematic review to assess the effects of extensions and restrictions in trading hours of on- and off-license alcohol outlets. We included new primary studies that help address limitations in previous reviews. We systematically searched electronic databases and reference lists, up to December 2018, and contacted the authors of eligible studies. Studies were eligible if (a) the design was randomized, or nonrandomized with at least one control site/series; (b) the intervention evaluated extensions or restrictions in trading hours at on- or off-license premises; and (c) the outcome measures were assault, unintentional injury, traffic crash, drink-driving offenses, or hospitalization. Two reviewers independently extracted data using a standard form that included study quality indicators. After screening 3,857 records, we selected 22 studies for the systematic review, all of which used an interrupted time series design. In the included studies, extension of trading hours concerned on-license premises only, whereas restriction concerned both on- and off-license premises. Extending trading hours at on-license premises was typically followed by increases in the incidence of assault, unintentional injury, or drink-driving offenses. Conversely, restricting trading hours at on- and off-license premises was typically followed by decreases in the incidence of assault and hospitalization. On balance, this review augments existing evidence that harm typically increases after extensions in on-license alcohol trading hours. It provides new evidence that alcohol-related harm decreases when on- and off-license trading hours are restricted.

Short-term Overreaction in American Depository Receipts

In this paper we examine for the first time the short-term predictability of American Depository Receipts (ADRs) in reaction to extreme price movements. Based on an analysis of 2,911 extreme price movements that took place within either normal trading hours or after-hours in the period 2001-2019, we conclude that those extreme returns were on average followed by significant reversals. This response represents an overreaction in prices, which challenges the weak version of the efficient market hypothesis. Price reversals are especially pronounced following extreme returns observed during after-hours, which lends support to the assertion that ADR markets are particularly inefficient during this trading period. These findings carry important implications for both market practitioners and regulators.

Temporal Effects in Index CDS Trading and Liquidity

Using high-frequency intraday trading and quoting data, we study the temporal effects in index credit default swap (CDS) trading and liquidity. We find strong intraday variations in index CDS trading activities and liquidity. Unlike the U-shaped trading pattern in the equity market, index CDSs exhibit a hump-shaped intraday trading pattern. Trading costs and return volatility are substantially lower in active trading hours, indicating that investors tend to trade when trading costs and price informativeness are low. We also observe strong day-of-the-week effects. Overall, these findings improve our understanding of the trading costs and liquidity in the over-the-counter derivatives market.

Stock Return Comovement When Investors are Distracted: More, and More Homogeneous

This paper tests whether fluctuations in investors' attention affect stock return comovement with national and global markets, and which stocks are most affected. We measure fluctuations in investor attention using 59 high-profile soccer matches played during stock market trading hours at the three editions of the FIFA World Cup between 2010 and 2018. Using intraday data for more than 750 firms in 19 countries, we find that distracted investors shift attention away from firm-specific and from global news. When movements in global stock markets are large, the pricing of global news reverts back to normal, but firm-specific news keep being priced less, leading to increased comovement of stock returns with the national stock market. This increase is economically large, and particularly strong for those stocks that typically comove little with the national market, thereby leading to a convergence in betas across stocks.

Impact of portfolio flows and heterogeneous expectations on FX jumps: Evidence from an emerging market

Motivated by the recent currency crisis in Turkey, we investigate the role of portfolio flows and heterogeneous expectations on the high frequency stochastic jump behavior of the US dollar value against the Turkish lira, one of the most traded emerging market currencies in the world. We group the detected jumps into different types with respect to their direction (up and down) and timing (local and off-shore trading hours). For each type of jumps, we examine their relation with portfolio flows (in the form of equity and bond flows, and carry trade activity), and dispersion in beliefs for the future exchange rate level and key macroeconomic variables. We find that inflows to both equity and bond markets, and increasing carry trade activity significantly reduce the size of jumps and (partially) their intensity. On the other hand, heterogeneous expectations for the future exchange rate level, consumer price index and gross domestic product are found to increase the number of jumps and the average jump size.

The impacts of terrorism on Turkish equity market: An investigation using intraday data

This study investigates the effects of thirty-five major terrorist attacks that occurred between 01/01/2012 and 12/31/2016 in Turkey on the Borsa Istanbul equity market. By applying the E-GARCH (1,1) model, it was detected that the incidents did not significantly affect the volatility. We examined the effects of the incidents on prices by employing event study analysis and using both daily and intraday data. The results of the intra-daily analysis demonstrated that the attacks that occurred during trading hours had the greatest negative effects in the first 30 min. Thereafter, the market ensured recovery by compensating its loss until the end of the day. When the daily effects of the attacks were observed, it was found that only four of the thirty-five attacks caused significant negative impacts on the days they occurred. Moreover, in the aftermath, the 6- and 11-day cumulative abnormal returns were significantly negative in only one among these four attacks. Therefore, the case-by-case findings showed that the Borsa Istanbul equity market is resistant to major terrorist attacks. Although the investors’ intense negative reactions were identified immediately after the incidents, it was clarified that they restored their confidence quickly, and the market turmoil mostly disappeared on the day of the incident.

The intraday timing of rating changes

Using time stamps of Standard & Poor's rating changes, we examine the timing of rating changes in an intraday setting. Our evidence shows that although most rating changes occur during trading hours, the proportion of downgrades announced after regular trading hours is higher than that of upgrades. In addition, unexpected after-hour downgrades are associated with more negative stock returns and lower trading volume in comparison to those announced during trading hours. We also find that Standard & Poor's is more likely to announce downgrades after hours when downgrades are released on busy days with many concurrent rating announcements, when they concern financial firms, and when they are unexpected. In addition, Egan-Jones Ratings (EJR), an investor-paid credit rating agency, demonstrates a similar tendency in announcing downgrades after trading hours. This is the first study to document systematic differences in the timing of credit rating changes announced before and after the market closes. Our findings suggest that Standard & Poor's announces downgrades after trading hours to better disseminate information, and thus have important policy implications.

The Index Effect Minute by Minute: Intraday Returns at NASDAQ-100 and MSCI U.S. Rebalancings

I use intraday data from 2013 to 2017 and a dataset of NASDAQ-100, MSCI USA and MSCI USA Small Cap Index constituent changes to investigate abnormal returns and trading volume around index rebalancings. The results show no pre-announcement speculation but a significantly positive (negative) post-announcement jump followed by an intraday drift for promotions (demotions). For small-cap changes, the post-announcement jump is smaller but abnormal returns with the same sign are also found on the rebalancing date and especially during the last 30 minutes of trading. Large-cap index changes have higher abnormal trading volume but much smaller abnormal returns on the rebalancing date. Consistent with the price pressure hypothesis, I find a reversal during the early trading hours on the day following the rebalancing date.

Do Credit Default Swap Prices Reveal the Presence of Informed Trading?

We attempt to answer a key question whether credit default swap (CDS) prices and price changes contain private information that are used by informed traders within 24 hours to cross-trade in the related equity market. By disaggregating daily stock return into day (exchange trading hours), evening, and night returns, we find that the credit default swap return of a stock, with high credit spread and high idiosyncratic volatility (hard-to-value), negatively impacts the next market-hours stock return in a significant way both via panel regression tests and via portfolio profitability tests. For stocks with low idiosyncratic volatility and thus higher predictability, the CDS return impact is milder and is opposite in direction, indicating a pattern of hedged investing. We show empirically that by evening after market-hours, the impacted stock return would reverse partially explanable by the well-established observation of trading overconfidence due to private information bias. For the case of low credit ratings stocks with high opaqueness or being hard-to-value, there is the additional interesting finding that large stock price changes due to CDS impact do not evidence any partial reversal on the eve of days in which actual credit rating downgrade happened. This reinforces the evidence of the presence of informed trading. We also find that limit-to-arbitrage such as stock illiquidity and short-sale constraint cannot fully explain the predictive results on stock returns based on CDS return signals.

Market Closures and Cross-sectional Stock Returns

By analyzing not only an overnight return but also a midday-recess return, namely, a stock return during midday-recess, I analyze whether and why market closures affect cross-sectional stock returns. I find strong persistence in overnight and midday-recess returns, with both returns positively associated with each other. Moreover, these out-of-trading-hours returns are negatively associated with returns during trading hours. I analyze whether these associations are explained by a different investor clientele outside trading hours (the open of the trading session) compared to during trading hours (intraday and closing of the trading session). I find that institutional ownership increases more with returns during trading hours; the finding indicates that those returns are mainly determined by institutional investors, while midday-recess and overnight returns, that is, returns outside trading hours, are not. Overall, my results support the view that market closures do affect cross-sectional returns and the influence is attributable to differences in the investor clientele.

Trading hours extension and intraday price behavior

Although studies argue that periodic market closure induces the well-known intraday price overreaction, namely, a negative association between intraday returns and overnight returns, no study examines how the overreaction phenomenon is affected by extending trading hours. This study empirically examines it by investigating two Japanese stock futures whose trading hours have been continuously and asynchronously extended. Surprisingly, the overreaction is stronger when the extended-hours session is longer, and trading activity during the session is higher. The result indicates that the extension can worsen the overreaction phenomenon, highlighting the existence of the negative impact of trading hours extension on price efficiency.

Modeling conditional volatility by incorporating non-regular trading hours into the APARCH model

ABSTRACT This study aims to evaluate how the after-market and pre-opening periods affect the estimation of conditional volatility one day ahead. Volatility features quite a lot in Finance studies because it is a fundamental parameter in derivatives pricing, the efficient allocation of portfolios, and risk management. The results are relevant for investment agents to be able to refine volatility forecasting models and achieve better results in derivatives pricing, risk management, and portfolio optimization. We used the asymmetric power autoregressive conditional heteroscedasticity (APARCH) model, incorporating the after-market, pre-opening, and total overnight periods to assess whether they contain important information for modeling volatility. We analyzed the 20 stocks of Brazilian companies listed on the São Paulo Stock, Commodities, and Futures Exchange (BM&FBovespa) and also belonging to the BR Titans 20 with ADRs listed on the New York Stock Exchange and the Nasdaq. The results were evaluated in-sample using the corrected Akaike information criterion (AICc) and the statistical significance of the coefficients, and out-of-sample using root mean squared error (RMSE), mean absolut percentage error (MAPE), the R² of the Mincer-Zarnowitz regression, and the Diebold Mariano test. The analysis does not enable it to be claimed which is the best model, because there is no unanimity among all the stocks; however, non-regular trading hours were shown to incorporate important information for most of the stocks. Furthermore, the models that incorporated the pre-opening period generally obtained superior results to the models that incorporated the after-market period, demonstrating that this period contains important information for forecasting conditional volatility.

Profitable Price Impact: The Case of Convertible Bond Arbitrage

We investigate a potential source of profit to convertible bond arbitrageurs that is new to the literature: anticipatory hedging in advance of convertible bond issues. When the reference stock price in a bond contract is determined after a new issue is announced, anticipatory short selling in the underlying stock can result in “profitable price impact” (PPI). Downward stock price pressure prior to bond pricing creates an abnormally cheap embedded call option. Consistent with PPI, we document issuer stock price declines on bond pricing days that are more concentrated during the last hour of trading and are followed by partial adjustments.