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T+1 trading mechanism causes negative overnight return
- Source :
- Economic Modelling. 89:55-71
- Publication Year :
- 2020
- Publisher :
- Elsevier BV, 2020.
-
Abstract
- The T+1 trading mechanism is unique in the Chinese stock market, thus providing a natural experimental field to study the trading mechanism and price behaviors. This paper proposes and proves that T+1 trading mechanism causes negative overnight return, the overnight return can serve as a proxy of the T+1 trading mechanism. The paper finds that the overnight return of the Chinese stock market is significantly negative, whereas those under the T+0 trading mechanism, such as China’s stock index futures, Hong Kong stocks, and major international indices, all have around 0 or positive overnight returns. T+1 trading mechanism has greater impacts on stocks with more divergent investor opinions, higher risk, more individual investor percentages, higher arbitrage restrictions, and less liquidity. The T+1 trading mechanism distorts the price generation mechanism of stocks. The paper contributes to the understanding of impact of trading mechanism on stock prices.
Details
- ISSN :
- 02649993
- Volume :
- 89
- Database :
- OpenAIRE
- Journal :
- Economic Modelling
- Accession number :
- edsair.doi...........362ba06d446d078ca1cae4acf939d9f1