Price Gaps: Another Market Anomaly?

What is it about?

This paper analyses price gaps (also known as trading, opening, common, stock, morning gaps – all these terms being used to indicate that the current day’s opening price is not the same as the previous day’s closing price), which have been detected at times in stock, FOREX and commodity markets. Applying a variety of statistical tests we are able to show that in most cases the observed price behaviour is not inconsistent with market efficiency, the exception being the FOREX: in this case a trading strategy based on exploiting this anomaly can generate abnormal profits.

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