Research On The Asymmetry Of Intraday-Overnight Volatility And Its Influencing Factors

The phenomenon that the intraday volatility is greater than the overnight volatility is widespread in all markets around the world,which is called the intraday-overnight volatility asymmetry.Its measurement indicator,Sigma Ratio,is a good proxy for the efficiency of information expression.The efficiency of information expression represents the effectiveness of the market and the validity of asset price.Higher level of efficiency of information expression means better information disclosure mechanism,quicker response to new information and more reasonable system.With the core variable Sigma Ratio representing efficiency of information expression,this paper carried out a comprehensive study on the asymmetry and its pricing power as well as contributing factors in Chinese stock index markets.On the basis of a systematic review of related research,we showed the empirical evidence of the asymmetry in Chinese capital market.Besides,we carried out a factor study on the asymmetry,testing its pricing power in time series(measurement aspect)and crosssection(back-testing aspect).What’s more,we explored the contributing factors of the asymmetry,including trading system,market conditions and fundamental aspects.Firstly,it is found that the asymmetry significantly exists in Chinese capital market,including CSI300 index and SSE50 index related markets and there’re differences in efficiency of information expression among markets which are related to the same asset.Secondly,the asymmetry reveals risks that have not been widely recognized.It is a qualified risk factor which can pass the Fama-Mac Beth test and the robustness test of yield backtest.Thirdly,special trading rules,such as the trading system adjustment in2015,“T+1” trading and short limit,weaken the asymmetry,which means they reduce the efficiency of information expression of related markets.As for individual stocks,differences in efficiency of information expression and in the sensitive of the market’s efficiency of information expression may come from their differences in terms of fundamental aspects such as market value and turnover rate.