A Revisit of the Cross-Section of Overnight and Intraday Abnormal Returns: Evidence from the Japanese REIT Market

Abstract

This study revisits an overnight-intraday reversal strategy that generates an abnormal excess return for a stock market. The study is the first to examine whether abnormal returns related to size effect and investment effect occur overnight or intraday in the Japanese Real Estate Investment Trust (J-REIT) market. Empirical results show that in the J-REIT market, significant positive abnormal returns on investment effect as well as size effect occur intraday, followed by reversals that negative abnormal returns occur overnight. Further empirical results reveal that foreign institutional investors and individual investors trade against domestic institutional investors, and strengthen the asymmetric intraday and overnight abnormal returns. Therefore, we support the hypothesis that investor heterogeneity can explain the overnight-intraday anomaly. Moreover, the J-REIT market responds quickly and significantly to announcements from the Bank of Japan (BOJ). The information surprise caused by BOJ’s announcements also intensifies the intraday and overnight abnormal returns in the J-REIT market.