 Tug of war with noise traders? Evidence from the G7 stock marketsAghamehman Hajiyev, Karl Ludwig Keiber and Adalbert Luczak The Quarterly Review of Economics and Finance, 2024, vol. 95, issue C, 234-243 Abstract: This paper studies the tug of war between overnight noise trading and daytime arbitrage in the G7 stock markets. We confirm Akbas, Boehmer, Jiang, and Koch (2022) reporting that this tug of war predicts future returns in the US stock market. We verify this result also in the Canadian stock market. In contrast, for the stock markets of France, Germany, Italy, the UK, and Japan, this tug of war is not predictive for future returns. These country-wise findings are documented in average raw returns and prevail upon risk adjustment along both Carhart (1997) four factors and Fama and French (2018) six factors. A microstructure perspective on the tug of war suggests that the split evidence between the US and Canadian stock markets and the remaining G7 stock markets is due to institutional and regulatory differences which restrict daytime institutional arbitrage in the European stock markets and Japan. Keywords: Overnight returns; Daytime reversals; Noise traders; Institutional arbitrage; International stock markets (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:95:y:2024:i:c:p:234-243 DOI: 10.1016/j.qref.2024.03.011 Access Statistics for this article The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty More articles in The Quarterly Review of Economics and Finance from Elsevier |
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