Sukwon Thomas Kim is an Assistant Professor of Finance in the A. Gary Anderson Graduate School of Management at the University of California in Riverside, CA.
The Timing of Opening Trades and Pricing Errors
Article first published online: 17 MAR 2013
© 2013 Financial Management Association International
Volume 42, Issue 3, pages 503–516, Fall 2013
How to Cite
Kim, S. T. (2013), The Timing of Opening Trades and Pricing Errors. Financial Management, 42: 503–516. doi: 10.1111/fima.12009
This project began as part of my Ph.D. dissertation at the Owen Graduate School of Management, Vanderbilt University. I wish to especially thank my dissertation chair, Hans Stoll, and other dissertation committee members for their excellent guidance and generous support. I acknowledge the data support from the Financial Markets Research Center (FMRC) of Vanderbilt University. I am grateful to Marc Lipson (Editor) and an anonymous referee for their suggestions and comments. I would also like to express my gratitude to Richard Smith for his comments.
- Issue published online: 26 AUG 2013
- Article first published online: 17 MAR 2013
- Accepted manuscript online: 3 JAN 2013 04:50AM EST
After demonstrating that a zero investment trading strategy that buys stocks with overnight returns below the market average and sells stocks with overnight returns above the market average earns more than 1% monthly profit, I demonstrate that this profit is greater for stocks that start trading more quickly than for other stocks. These results control for trading costs. The resulting pricing errors are a material portion of stock price volatility and suggest that a quick response to overnight information adds non-information-based stock volatility to stock prices.