How do investors react to overnight returns? Evidence from Korea

Hyuna Ham; Doojin Ryu; Robert I. Webb; Jinyoung Yu

doi:10.1016/j.frl.2023.103779

How do investors react to overnight returns? Evidence from Korea

Hyuna Ham, Doojin Ryu^*, Robert I. Webb, Jinyoung Yu

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

5 Citations (Scopus)

Abstract

We find a negative relationship between overnight and daytime returns on the Korean equity market. Overnight returns are positively (negatively) and nonlinearly associated with subsequent daytime returns when the overnight news is relatively good (bad). Trades by individual investors respond negatively to overnight returns, whereas those by domestic and foreign institutional investors exhibit positive-feedback trading behavior. Our findings challenge the conventional presumption about investors’ responses to overnight returns.

Original language	English
Article number	103779
Journal	Finance Research Letters
Volume	54
DOIs	https://doi.org/10.1016/j.frl.2023.103779
Publication status	Published - Jun 2023
Externally published	Yes

Keywords

Daytime reversal
Individual investor
Institutional investor
Korean equity market
Overnight return

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10.1016/j.frl.2023.103779

Cite this

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title = "How do investors react to overnight returns? Evidence from Korea",

abstract = "We find a negative relationship between overnight and daytime returns on the Korean equity market. Overnight returns are positively (negatively) and nonlinearly associated with subsequent daytime returns when the overnight news is relatively good (bad). Trades by individual investors respond negatively to overnight returns, whereas those by domestic and foreign institutional investors exhibit positive-feedback trading behavior. Our findings challenge the conventional presumption about investors{\textquoteright} responses to overnight returns.",

keywords = "Daytime reversal, Individual investor, Institutional investor, Korean equity market, Overnight return",

author = "Hyuna Ham and Doojin Ryu and Webb, {Robert I.} and Jinyoung Yu",

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AU - Webb, Robert I.

AU - Yu, Jinyoung

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N2 - We find a negative relationship between overnight and daytime returns on the Korean equity market. Overnight returns are positively (negatively) and nonlinearly associated with subsequent daytime returns when the overnight news is relatively good (bad). Trades by individual investors respond negatively to overnight returns, whereas those by domestic and foreign institutional investors exhibit positive-feedback trading behavior. Our findings challenge the conventional presumption about investors’ responses to overnight returns.

AB - We find a negative relationship between overnight and daytime returns on the Korean equity market. Overnight returns are positively (negatively) and nonlinearly associated with subsequent daytime returns when the overnight news is relatively good (bad). Trades by individual investors respond negatively to overnight returns, whereas those by domestic and foreign institutional investors exhibit positive-feedback trading behavior. Our findings challenge the conventional presumption about investors’ responses to overnight returns.

KW - Daytime reversal

KW - Individual investor

KW - Institutional investor

KW - Korean equity market

KW - Overnight return

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SN - 1544-6123

VL - 54

JO - Finance Research Letters

JF - Finance Research Letters

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How do investors react to overnight returns? Evidence from Korea

Abstract

Keywords

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