Objective research to aid investing decisions
Menu
Value Allocations for September 2019 (Final)
Cash TLT LQD SPY
Momentum Allocations for September 2019 (Final)
1st ETF 2nd ETF 3rd ETF

Tug-of-war Risk and Future Stock Returns

Posted in Animal Spirits, Calendar Effects

Does persistence in the difference in direction between overnight stock trading and intraday stock trading behaviors (tug of war) predict future returns? In their January 2019 paper entitled "Overnight Returns, Daytime Reversals, and Future Stock Returns: The Risk of Investing in a Tug of War with Noise Traders", Ferhat Akbas, Ekkehart Boehmer, Chao Jiang and Paul Koch investigate relationships between intensity of the daily tug-of-war between between overnight (noise) and intraday (other) stock traders and future stock returns. They specify tug-of-war intensity as percentage of trading days during a month for which a stock exhibits negative (or positive) daytime reversals divided by average monthly percentage of negative (or positive) reversals over the last 12 months. They then examine whether either negative or positive tug-of-war intensity predicts future stock returns. Using overnight/intraday stock returns for a broad sample of U.S. common stocks, along with monthly returns for widely accepted factors, during May 1993 through December 2017, they find that:

Please or subscribe to continue reading...
Gain access to hundreds of premium articles, our momentum strategy, full RSS feeds, and more!  Learn more

Daily Email Updates
Login
Research Categories
Recent Research
Popular Posts