Tests of stability for variances and means of overnight/intraday returns during bull and bear markets

Abstract

This paper examines the behavior of overnight and intraday returns during (and across) bull and bear markets. Robust tests, new to the finance literature, are performed to examine the stability of both variability of returns and mean returns over time Comparing bull and bear markets, intraday returns are significantly more volatile during bear markets, but no statistical difference in overnight returns is found. Variability of returns is significantly greater intraday than overnight during both bull and bear markets. Differences in mean returns between bull and bear markets are shown to occur primarily intraday rather than overnight. Implications for future studies of trading phenomena and return generating processes are presented. © 1990.

Publication Title

Journal of Banking and Finance

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