Overnight Returns: An International Sentiment Measure

Abstract

Taking into account expected return characteristics like firm size and book-tomarket in the selection of winners and losers helps to ex ante separate stocks with momentum from those that exhibit reversal in international equity markets. A strategy that buys small value winners and sells large growth losers generates significantly larger momentum profits than a standard momentum strategy, is robust to common return controls, and does not suffer from return reversals for holding periods up to three years. The superior performance of the strategy is attributable to a rather systematic exploitation of cross-sectional mispricing among momentum stocks.

How Does Firm‐Specific Investor Sentiment Affect the Value of Corporate Cash Holdings?

“…Recent studies show mixed evidence in the suitability of overnight returns as a FSIS measure in international equity markets. Weißofner and Wessels (2020) confirm the validity of overnight returns as a FSIS measure in 20 developed non‐US equity markets. However, Xiong et al.…”

Impact of education, age and gender on investor's sentiment: A survey of practitioners

“…Very recent studies include the paper on international sentiment measure by Weißofner and Wessels (2020) , and the paper by Nogueira and Pinho (2020) which, in addition to presenting an extensive literature review, develop a set of investors’ sentiment proxies. All these outstanding efforts confirm the relevance of this variable which best proxy continues to be an open issue.…”

Fast-Thinking Attention and the Disposition Effect

“…One potential concern with my methodology is that previous studies have documented that extreme stock returns are a significant determinant of retail trading activity, and news sources and the Robinhood app provide lists of the stocks each day with the largest absolute returns (Weißofner and Wessels 2020;Barber et al 2021). In my primary analysis, I alleviate this concern by controlling for the absolute value of the continuation return (i.e., the return at the end of the onehour measurement window) and its interaction with Positive.…”

“…Descriptive StatisticsTable2, Panel A provides descriptive statistics for the entire sample of absolute 5% return firm-days. The mean change in retail sales, trades, and purchases (all calculated analogous to sales described above) from the hour prior to the hour after the 5% trigger are all positive, which is consistent with prior literature that documents retail traders' attraction to volatile stocks (e.g.,Myhre and Henriksen 2020;Weißofner and Wessels 2020). This statistic also underscores the importance of comparing stocks that have the same daily price path, since the price path itself attracts retail trading activity.…”