“A Pond for Small Fish? News and (Retail) Trading After-Hours”

Arie Gozluklu

University of Warwick

Abstract: We explore after-hours trading (AHT) in U.S. equity markets. We collect a large set of news releases during AHT and show their effect on AHT activity and market quality. AHT returns, volatility, and next-day returns reflect the AHT news sentiment. In a difference-indifference (DiD) setting, we show that scheduled and positive after-hours firm-specific news catches the attention of retail participants. We find weaker evidence of retail traders chasing insider trading news. We use a machine learning algorithm on Robinhood retail popularity to construct a new measure of retail trading during AHT. We identify the (buyer-initiated) odd lot trades on the CBOE exchange which offers a platform (EDGX) with retail priority as the main predictor of AHT retail activity. Robinhood AHT extension in 2022 provides confirming evidence.