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Article

Slow Price Adjustment to Public News in After-Hours Trading

Jiasun Li
The Journal of Trading Summer 2016, 11 (3) 16-31; DOI: https://doi.org/10.3905/jot.2016.11.3.016
Jiasun Li
is a PhD candidate at UCLA Anderson School of Management in Los Angeles, CA.
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  • For correspondence: jiasun.li.1@anderson.ucla.edu
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Abstract

Almost all U.S. firms now announce earnings outside of regular trading hours. This article studies how stock prices incorporate information in after-hours trading. The author finds slow price adjustment accompanied by significant trading volume. During the 2002–2012 period, 5,881 rule-based trading opportunities generated an average return of 1.53% within four hours. After costs (assessed by a trading experiment), an investor who properly exploited the slow adjustment beat the market by 11.5% a year. The slow price adjustment persists under various levels of investor inattention, limited arbitrage capital, and short-sale constraints.

  • © 2016 Institutional Investor, Inc.
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The Journal of Trading: 11 (3)
The Journal of Trading
Vol. 11, Issue 3
Summer 2016
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Slow Price Adjustment to Public News in After-Hours Trading
Jiasun Li
The Journal of Trading Jun 2016, 11 (3) 16-31; DOI: 10.3905/jot.2016.11.3.016

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Slow Price Adjustment to Public News in After-Hours Trading
Jiasun Li
The Journal of Trading Jun 2016, 11 (3) 16-31; DOI: 10.3905/jot.2016.11.3.016
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  • Article
    • Abstract
    • DATA
    • THE SLOW PRICE ADJUSTMENT
    • PROFITABILITY OF THE BUY PAS/SELL NAS STRATEGY
    • PRICE ADJUSTMENT SPEED: CROSS-SECTIONAL VARIATION
    • CONCLUSION
    • APPENDIX A
    • APPENDIX B
    • APPENDIX C
    • ENDNOTES
    • REFERENCES
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