 Asset pricing: A tale of night and dayTerrence Hendershott,
Dmitry Livdan and
Dominik Rösch
Journal of Financial Economics, 2020, vol. 138, issue 3, 635-662 Abstract: The capital asset pricing model (CAPM) performs poorly overall, as market risk (beta) is weakly related to 24-h returns. This is because stock prices behave very differently with respect to their sensitivity to beta when markets are open for trading versus when they are closed. Stock returns are positively related to beta overnight, whereas returns are negatively related to beta during the trading day. These day-night relations hold for beta-sorted portfolios and individual stocks in the US and internationally as well as for industry and book-to-market portfolios and cash flow and discount rate beta-sorted portfolios. In addition to the change in slope of returns with respect to beta, the implied risk-free rate differs significantly between night and day. Consistent with this, returns on US Treasury futures differ significantly between night and day. Keywords: Asset pricing; CAPM; Risk-free rate; Day-night (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:jfinec:v:138:y:2020:i:3:p:635-662 DOI: 10.1016/j.jfineco.2020.06.006 Access Statistics for this article Journal of Financial Economics is currently edited by G. William Schwert More articles in Journal of Financial Economics from Elsevier |
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