OVERNIGHT–DAYTIME RETURN REVERSALS AND FUTURE RETURN: EVIDENCE FROM THE THAI STOCK MARKET

Abstract

This study examines whether overnight–daytime return reversals predict future stock returns in the Thai stock market. Motivated by the tug-of-war hypothesis, we analyze how price adjustments between overnight and daytime trading sessions operate in an emerging market setting. Using Thai stocks over the period 2014–2024, daily returns are decomposed into overnight (close-to-open) and daytime (open-to-close) components. Reversal intensity is measured through the frequency of negative and positive reversals and their abnormal counterparts. We employ portfolio-sorting and regression-based analyses across alternative portfolio constructions, including equal- and value-weighted portfolios, as well as size and book-to-market subsamples. The results show that, unlike evidence from developed markets, overnight–daytime reversals exhibit limited predictive power for future returns at the aggregate level in Thailand. While overnight and daytime components display distinct patterns individually, their effects largely offset each other. Overall, the findings provide new evidence on intraday price adjustment dynamics in an emerging market.