Download or read book Short Sale Constraints, Dispersion of Opinions, and Overnight Returns written by Henk Berkman and published by . This book was released on 2007 with total page 86 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using nine years of data for the largest 3,000 U.S. stocks, we find a tendency for positive returns during the overnight non-trading period followed by reversals during the subsequent trading day session. This pattern is driven by an opening price that is high relative to intraday prices, rather than by a closing price that is low, suggesting that an overnight liquidity premium cannot be the sole cause of this price regularity. Instead, consistent with Miller's (1977) theory applied to the overnight period, we find this behavior is more prevalent among stocks that are more overpriced - with more binding short sale constraints and higher dispersion of opinions. Such overpriced stocks have a higher opening price, and a concomitant tendency for larger overnight returns and trading day reversals.