Publications & Research


1- High Frequency Correlation Dynamics and Day-of-the-Week Effect: A score-Driven Approach in an Emerging Market Stock Exchange. 2022. International Review of Financial Analysis, (with Cenk C. Karahan), 80, 102008

2- Epps Effect still existent: Differing unconditional correlation behaviors for inter-sector stock pairs. 2020. International Journal of Disciplines Economics & Administrative Sciences Studies, 6(24), 797-805


1-New Avenues in Expected Returns: Investor Overreaction and Overnight Price Jumps in US Stock Markets

(with Lammertjan Dam & Halit Gonenc)


Using 9,283 stocks listed on NYSE, AMEX, and NASDAQ, we analyze overnight price jumps and report short-term investor overreaction to information shocks, and document return reversal and predictability for up to five days. For negative and positive overnight jumps, results are significant and robust to various model specifications. In the cross-section, the degree of reversal is considerably larger for stocks that are less costly to arbitrage. In contrast to this overreaction, a zero-cost contrarian trading strategy with extreme decile portfolios -shaped according to lagged jump returns- incurs 0.6% of risk-adjusted loss in a 1-month investment horizon. Together, these connote that documented overreaction and return reversal are short-term market phenomena. The novel findings for jump stocks also build a new avenue for overnight and intraday expected returns in the recently renowned tug-of-war literature which relies on investor heterogeneity. We show that jump stocks have significantly different abnormal returns than non-jump stocks in both overnight and intraday components for the next month. Our study stands at the intersection of overreaction, jump, and return predictability literature by paying special attention to investor behaviors around
price discontinuities and post-shock return dynamics.

2-Market Ambiguity and Mispricing in S&P500 Futures Contracts

(with Cenk C. Karahan)


We empirically unveil the effect of having multiple priors on asset mispricing in the market where mean-variance optimization and Bayesian approach do not have any say. We show that the level of mispricing in S&P500 E-Mini futures contracts is also linked to the degree of prevailing market ambiguity. Crucial findings are in order: First, our study unearths how different levels of Knightian uncertainty impact the direction and level of mispricing in US futures markets. Second, profound analysis reveals an asymmetric outlook for episodes of market euphoria and unrest. Third, we identify the primary channels through which the ambiguity permeates the market. Findings are robust to different ambiguity measurement techniques. Extant literature on marred prospects and market implications rests heavily on experimental data. This study expands recently burgeoning thin literature that is built upon market data.

PS: We are now focusing on the main drivers of futures markets. Hazelkorn et al. (2023) show that liquidity demands from different market actors shape futures-cash basis. In a similar fashion, we are currently compiling data from the Commodity Futures Trading Commission to work on the supply & demand dynamics and cross-market activities of different clientele.


1‑Invisible Hand on Correlations: Portfolio Rebalancing

2‑ Role of Ambiguity in Investor Overreaction Around Information Shocks

(with Cenk C. Karahan and Merve Gizem Cevheroglu)

3‑ Discontinuity‑induced Circuit Breaker and Price Efficiency in Stock Markets