What Drives Momentum and Reversal? Evidence from Day and Night Signals-Vincent Bogousslavsky (Boston College)

Département: Finance

Intervenant: Vincent Bogousslavsky (Boston College) 

Lieu: Salle T020

Abstract

Overnight returns are mostly driven by news, whereas intraday returns are mostly
driven by investors’ trading. We use this fact to test theories of momentum and reversal
with a sample of intraday and overnight returns spanning 1926 to 2019. Portfolios
formed on past intraday returns display short-term reversal and momentum without
long-term reversal. In contrast, portfolios formed on past overnight returns display
only long-term reversal. These results are consistent with underreaction theories of
momentum, where investors underreact to the information conveyed by the trades of
other investors.