Journal of Financial and Quantitative Analysis Vol. 53 No. 2 2018
Overnight Returns and Firm-Specific Investor Sentiment
Abstract
We examine the suitability of using overnight returns to measure firm-specific investor sentiment by analyzing whether they possess characteristics expected of a sentiment measure. We document short-term overnight-return persistence, consistent with existing evidence of short-term persistence in the share demand of sentiment-influenced investors. We find that short-term persistence is stronger for harder-to-value firms, consistent with existing evidence that sentiment plays a larger role for such firms. We show that stocks with high (low) overnight returns underperform (outperform) over the longer term, consistent with prior evidence of temporary sentiment-driven mispricing. Overall, our evidence supports using overnight returns to measure firm-specific sentiment.
- DOI
- 10.1017/s0022109017000989
- Volume
- 53
- Issue
- 2
- Pages
- 485-505
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref