{"title":"Asymmetric trading restriction and return comovement","authors":"Hongbing Zhu , Lihua Yang , Bing Zhang","doi":"10.1016/j.intfin.2024.102023","DOIUrl":null,"url":null,"abstract":"<div><p>This study decomposes the overall return comovement into intraday and overnight comovement based on a model-free framework. It shows that intraday return comovement contributes the most to the overall return comovement, but the impact of overnight return comovement is persistent. Investors under the market with asymmetric trading restrictions (ATR) tend to sell stocks early in the market and buy them near the end of the market. This correlated trading behavior contributes to the specific comovement in stock returns, especially the overnight return. Our findings remain solid even after controlling for more stock attributes and changing the proxies for return comovement and investor trading behavior. We also document a weakening (reinforcing) effect of the short-selling mechanism (disposition effect) on the <em>ATR</em>-induced return comovement. Our results provide a deeper understanding of investors’ trading behavior under ultra-short-term trading restrictions and the source of return comovement in the literature.</p></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"94 ","pages":"Article 102023"},"PeriodicalIF":5.4000,"publicationDate":"2024-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of International Financial Markets Institutions & Money","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1042443124000891","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
This study decomposes the overall return comovement into intraday and overnight comovement based on a model-free framework. It shows that intraday return comovement contributes the most to the overall return comovement, but the impact of overnight return comovement is persistent. Investors under the market with asymmetric trading restrictions (ATR) tend to sell stocks early in the market and buy them near the end of the market. This correlated trading behavior contributes to the specific comovement in stock returns, especially the overnight return. Our findings remain solid even after controlling for more stock attributes and changing the proxies for return comovement and investor trading behavior. We also document a weakening (reinforcing) effect of the short-selling mechanism (disposition effect) on the ATR-induced return comovement. Our results provide a deeper understanding of investors’ trading behavior under ultra-short-term trading restrictions and the source of return comovement in the literature.
期刊介绍:
International trade, financing and investments, and the related cash and credit transactions, have grown at an extremely rapid pace in recent years. The international monetary system has continued to evolve to accommodate the need for foreign-currency denominated transactions and in the process has provided opportunities for its ongoing observation and study. The purpose of the Journal of International Financial Markets, Institutions & Money is to publish rigorous, original articles dealing with the international aspects of financial markets, institutions and money. Theoretical/conceptual and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • International financial markets • International securities markets • Foreign exchange markets • Eurocurrency markets • International syndications • Term structures of Eurocurrency rates • Determination of exchange rates • Information, speculation and parity • Forward rates and swaps • International payment mechanisms • International commercial banking; • International investment banking • Central bank intervention • International monetary systems • Balance of payments.