High trading volume is a 'buy' signal for the overnight period but a 'sell' signal for the intraday period, consistently across global markets.
March 31, 2026
Original Paper
<div> Online Appendix for Expected Return in Night and Day:&nbsp; </div> <div> The Role of Trading Volume </div>
SSRN · 6371518
The Takeaway
Most investors view high volume as a generic indicator of interest or momentum. This paper reveals that volume actually captures 'investor disagreement' that predictably decays over the day, causing a persistent disconnect between how a stock performs when the market is open versus when it is closed.
From the abstract
We document a novel high-volume overnight premium and intraday discount. Stocks with high trading volume exhibit remarkable future outperformance (underperformance) during the overnight (intraday) period. This phenomenon is highly persistent and prevalent across global equity markets. We rationalize such contrasting night-day effect using a model with information asymmetry. Driven primarily by the overconfidence of late-informed investors, the cycling belief dispersion peaks at market open and d