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The mean-variance relation: A story of night and day

Wang, Wenzhao

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Abstract

The traditional financial framework theorizes a positive mean-variance relation, which, however, is not fully supported by empirical evidence. We provide a new explanation for the weak mean-variance relation by separately testing the relation overnight and intraday. Results at the global level present a positive mean-variance relation overnight but a negative relation intraday, while results of individual markets reveal a high degree of heterogeneity. We employ cultural dimensions, market integrity, and market development to examine the drivers of the observed cross-market differences, showing that all the three factors influence the mean-variance relation, and notably, the influence varies across night and day.

Citation

Wang, W. (2023). The mean-variance relation: A story of night and day. Journal of International Financial Markets, Institutions and Money, 86, Article 101796. https://doi.org/10.1016/j.intfin.2023.101796

Journal Article Type Article
Acceptance Date Jun 6, 2023
Online Publication Date Jun 13, 2023
Publication Date 2023-07
Deposit Date Jun 16, 2023
Publicly Available Date Jun 16, 2023
Print ISSN 1042-4431
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 86
Article Number 101796
DOI https://doi.org/10.1016/j.intfin.2023.101796
Keywords Culture, Global, Intraday, Market integrity, Mean-variance relation, Overnight

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