The overnight drift
We show that nearly 100 percent of the U.S. equity premium is earned over a window around the opening hours of European markets when U.S. cash markets are closed. We explore two potential complementary explanations. First, consistent with predictions from dealer inventory risk models, we find (1) a strong negative link to end-of-day order imbalance; (2) reversals are amplified in periods of high volatility; and (3) in recent years dealers have increasingly offloaded inventory during Asian trading hours. Second, shocks to end-of-day quantities of risk lead to increases in overnight expected returns.
Year of publication: |
2021
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Authors: | Boyarchenko, Nina ; Larsen, Lars C. ; Whelan, Paul |
Publisher: |
New York, NY : Federal Reserve Bank of New York |
Subject: | overnight returns | immediacy | inventory risk | volatility risk |
Saved in:
freely available
Series: | Staff Report ; 917 |
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Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
Other identifiers: | 1691546429 [GVK] hdl:10419/241110 [Handle] |
Classification: | G13 - Contingent Pricing; Futures Pricing ; G14 - Information and Market Efficiency; Event Studies ; G15 - International Financial Markets |
Source: |
Persistent link: https://www.econbiz.de/10012619494