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

Wang, Wenzhao

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