Abstract: Stock Returns over Open and Closed Trading Periods

George S. Oldfield and Richard J. Rogalski

Journal of Financial and Quantitative Analysis, 1979, vol. 14, issue 4, 807-811

Abstract: Random stock returns result from irregular vibrations of a share's price through time. Divide any arbitrary time interval into two mutually exclusive and exhaustive sets. One set contains time periods when trading is formally open on an organized market such as the New York Stock Exchange (NYSE). Its complement contains closed trading time periods, i.e., when the NYSE is not open. Conventional theory assumes that the same return process operates over all periods in both sets. No allowance is made for possible differences in the return sequence between sets or among time periods within each set. There are reasons to assume that such differences may exist. For example, during a trading day, stock prices fluctuate as orders are executed. During nights, weekends, holidays, and holiday-weekends there are no transactions, but a share's value from close to open on the next trading day may still change to reflect revised expectations about a firm's productivity. In fact, capital changes and important news items are usually announced after the stock exchanges close.

Date: 1979
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