This paper examines opening and closing return patterns on the Chinese stock markets. We find that open-to-open returns are significantly more volatile than close-to-close returns. In addition, the correlation of the overnight return with the following daytime return is significantly negative, while the correlation of the daytime return with the following overnight return is strongly positive. The results show strong price continuation around the close and strong price reversal at the open, and the findings are not sensitive to trading volume. The findings are less likely to be caused by price limits. Our results are inconsistent with previous findings from the Tokyo Stock Exchange, yet similar to those from the New York Stock Exchange, albeit under a different market structure.

Additional Metadata
Keywords Chinese stock markets, Microstructure, Price limits, Trading mechanisms, Transitory volatility
Persistent URL dx.doi.org/10.1142/S0219091507001185
Journal Review of Pacific Basin Financial Markets and Policies
Citation
Zhang, Z. (Zhaohui), Nemiroff, H, Wang, J. (Jiamin), & Karim, K. (Khondkar). (2007). Transitory price changes in the Chinese stock markets. Review of Pacific Basin Financial Markets and Policies, 10(4), 519–540. doi:10.1142/S0219091507001185