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Keywords:

  • market efficiency;
  • liquidity;
  • night trading;
  • night session;
  • overreaction;
  • extreme price movements;
  • winners;
  • losers
  • G12;
  • G14

Forward Links to Citing Articles Erratum. The Financial Review 41: 2, 305. Online publication date: 11-Apr-2006.

Abstract

Night trading provides an ideal laboratory to assess the behavior of stock markets when institutional liquidity providers are less active. The evidence indicates that extreme positive (winner) and negative (loser) stock-price movements during night sessions are followed by reversals the next day. The reversals are more pronounced following extreme stock-price movements that are associated with less trading volume and lower liquidity. Within-the-night sample reversals are less pronounced for stocks of companies issuing earnings announcements.