Overnight versus Intraday Momentum and Investor Heterogeneity: Evidence from the Korean Equity Market

Abstract

I provide aheterogeneity-based explanation for robust
overnight and intraday momentum, as well as offsetting cross-period reversals in the Korean equity market from 2014 to 2017, using investor-type trade flow data. I demonstrate that retail investors' attention-based trading on overnight returns and domestic institutions' arbitrage trading on intraday returns drive these relationships, employing Fama-Macbeth (1973) cross-sectional regressions. Finally, I show that the trading behavior of sentiment-prone retail investors weakens when overall market sentiment is pessimistic, particularly during down markets and financial crises. This study has significant implications for the literature on investor heterogeneity and stock prices.