4-Factor Model for Overnight Returns

Zura Kakushadze

Papers from arXiv.org

Abstract: We propose a 4-factor model for overnight returns and give explicit definitions of our 4 factors. Long horizon fundamental factors such as value and growth lack predictive power for overnight (or similar short horizon) returns and are not included. All 4 factors are constructed based on intraday price and volume data and are analogous to size (price), volatility, momentum and liquidity (volume). Historical regressions a la Fama and MacBeth (1973) suggest that our 4 factors have sizable serial t-statistic and appear to be relevant predictors for overnight returns. We check this by using our 4-factor model in an explicit intraday mean-reversion alpha.

Date: 2014-10, Revised 2015-06
New Economics Papers: this item is included in nep-fmk
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Citations: View citations in EconPapers (8)

Published in Wilmott Magazine 2015(79) (2015) 56-62

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1410.5513

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