📈 economics

Overnight cryptocurrency downside and opening versus intraday equity returns in Southeast Asia

This study analyzes data from August 2020 to July 2026 across four Southeast Asian markets to demonstrate that while overnight cryptocurrency downside negatively impacts equity returns in all regions, the timing of this effect varies significantly, with Vietnam showing a predominant concentration of the association during intraday trading rather than at the market open.

Original authors: Quan Pham, Xuan Phan

Published 2026-10-27

📖 5 min read🧠 Deep dive

CC BY 4.0

Original authors: Quan Pham, Xuan Phan

Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). ✨ This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer

The world of finance operates on a rhythm of open and closed doors. Traditional stock markets, where companies trade shares, have strict hours; they open in the morning, trade for a few hours, and then close for the night. During those closed hours, the lights go out, the trading floors empty, and the prices freeze. In contrast, the market for digital currencies never sleeps. It trades around the clock, every day of the week, reacting instantly to news and events while the traditional stock markets are silent. This creates a unique situation: when the stock market is closed, the digital currency market is still moving, potentially absorbing new information that could influence how stocks behave the moment they reopen.

Researchers have long wondered how this overnight movement in digital currencies affects the stock market the next day. Does the impact happen immediately when the stock market opens, or does it unfold slowly as the day progresses? To answer this, a team of researchers from the Industrial University of Ho Chi Minh City looked closely at four countries in Southeast Asia: Vietnam, Singapore, Malaysia, and Indonesia. They focused on a specific type of digital currency movement: the downside, or when digital currencies lose value overnight. By tracking how these losses correlated with stock market performance, they sought to pinpoint exactly when the stock market reacts to the news gathered while it was closed.

The study covered a six-year period, from August 2020 to July 2026, analyzing data from major stock indices in each country alongside a basket of eight popular digital currencies. The researchers used a highly automated system to gather public market data, align the different time zones, and calculate the relationships between the overnight digital currency drops and the stock market returns. They broke the stock market day into two distinct parts: the "opening return," which is the price change from the previous day's close to the moment the market opens, and the "intraday return," which is the price change that happens after the market opens and continues until it closes again. This separation allowed them to see if the reaction to bad news in digital currencies happened all at once at the start of the day, or if it played out over the course of trading hours.

The results revealed a striking difference in how these markets react, particularly in Vietnam. In Vietnam, the connection between overnight digital currency losses and the stock market was found to be concentrated almost entirely during the trading day, rather than at the opening. When the researchers measured a standard increase in the severity of overnight digital currency losses, they found it was associated with the main Vietnamese stock index opening 2.3 basis points lower. However, the rest of the trading day saw a much larger drop, with the index falling an additional 14.9 basis points. This means that roughly 86 percent of the total negative effect happened after the market had already opened and trading was underway. The opening gap itself was relatively small compared to the movement that followed.

This pattern held true across other major stock indices within Vietnam, including those tracking large companies and smaller ones. The researchers confirmed this finding by checking the data against independent records to ensure the opening prices were accurate, and the result remained consistent. In contrast, the picture looked different in Singapore. There, the reaction to overnight digital currency losses was more front-loaded. The Singaporean stock index showed a larger drop right at the opening, with a smaller movement occurring later in the day. When the researchers compared Vietnam directly with Singapore and Malaysia, the difference was statistically clear: the Vietnamese market delayed most of its reaction until after the opening bell, while the Singaporean market reacted more immediately. The data for Malaysia and Indonesia showed mixed or less precise results, but the contrast between Vietnam and Singapore was a central finding of the study.

The study also looked at whether these patterns were simply a result of general market trends or specific to the timing of the reaction. By controlling for major global factors like the performance of US stock markets and changes in oil prices, the researchers ensured that the observed patterns were specifically linked to the digital currency downside. They found that the timing of the reaction was a distinct feature of each market. In Vietnam, the information gathered while the market was closed seemed to be processed and priced in gradually as traders interacted during the day, rather than being dumped all at once when the doors opened. This suggests that the way investors in different countries absorb and react to overnight news varies significantly, even within the same region.

Ultimately, the research demonstrates that looking only at the total change in a stock price from one day's close to the next can hide important details about how markets work. By separating the opening moment from the rest of the trading day, the study showed that the same overnight signal can lead to very different patterns of price movement depending on the country. In Vietnam, the market appears to take its time to adjust to bad news from the digital currency world, with the bulk of the adjustment happening while the market is open. In Singapore, the adjustment happens faster, right at the start. These findings add a new layer of understanding to how global financial markets are connected, showing that the timing of price changes is just as important as the changes themselves.

Technical Summary: Overnight Cryptocurrency Downside and Opening versus Intraday Equity Returns in Southeast Asia

Problem Statement
Cryptocurrency markets operate 24/7, whereas equity exchanges close daily. This creates an "overnight" window where cryptocurrency prices evolve while equity markets are inactive. While recent literature establishes that overnight cryptocurrency returns contain predictive content for subsequent equity returns (e.g., Mourey et al., 2025; Gu et al., 2026), a critical gap remains regarding when this information is incorporated into equity prices. Specifically, it is unclear whether the association between overnight cryptocurrency downside and equity returns manifests primarily at the market open (the opening gap) or during the subsequent trading session (intraday returns). This timing may vary significantly across different market microstructures.

Methodology
The study examines four Southeast Asian equity markets: Vietnam (VN-Index, VN30, VNMidcap, VNSmallcap), Singapore (Straits Times Index), Malaysia (FTSE Bursa Malaysia KLCI), and Indonesia (Jakarta Composite Index). The sample period spans from August 2020 to July 2026.

Data Construction:
- Cryptocurrency Signal: The authors construct a "Consensus-Weighted Market Downside Severity" (CMDS) measure. This combines the breadth of declines (fraction of 8 major cryptocurrencies—BTC, ETH, XRP, ADA, SOL, DOGE, LTC, TRX—that declined) and the median severity of those declines. The measure is standardized within each equity market.
- Equity Returns: For each session, returns are decomposed into three components:
  1. Close-to-Close ( $R^{TOT}$ ): The total daily return.
  2. Opening Return ( $R^{ON}$ ): The change from the previous close to the current open.
  3. Intraday Return ( $R^{ID}$ ): The change from the open to the current close.
- Controls: Regressions include six US-based controls (S&P 500, Nasdaq, VIX change, USD Index, 10-year Treasury yield change, WTI crude oil), lagged equity returns, and fixed effects for weekdays and month-years.
Estimation Strategy:
- The authors estimate three separate regressions for each market using identical observations and regressors: one for $R^{TOT}$ , one for $R^{ON}$ , and one for $R^{ID}$ .
- Due to the identity $R^{TOT} = R^{ON} + R^{ID}$ , the estimated coefficients satisfy $\hat{\beta}^{TOT} = \hat{\beta}^{ON} + \hat{\beta}^{ID}$ .
- Key Metrics: The study focuses on the allocation difference $D_c = \hat{\beta}^{ON}_c - \hat{\beta}^{ID}_c$ and the intraday share $s_c = \hat{\beta}^{ID}_c / \hat{\beta}^{TOT}_c$ .
- Inference: Standard errors are calculated using Newey–West HAC estimators. Cross-market comparisons on common trading dates utilize joint HAC covariance and circular moving-block bootstraps. Holm adjustments are applied to control for multiplicity across the primary comparisons.
- Reproducibility: An end-to-end automated pipeline retrieves data from Binance, VNDIRECT, and Yahoo Finance, aligns timestamps, and regenerates all tables and figures.

Key Results

Vietnam: Predominantly Intraday Association
- In the VN-Index, a one-standard-deviation increase in overnight cryptocurrency downside is associated with a 2.3 basis point (bp) lower opening return and a 14.9 bp lower intraday return.
- The difference between the intraday and opening coefficients is 12.5 bp (95% CI: 4.3–20.7; Holm-adjusted $p=0.014$ ).
- The intraday component accounts for 86% of the total estimated association. This pattern holds consistently across VN30, VNMidcap, and VNSmallcap.
- This configuration aligns with the "intraday continuation" pattern, where the signal persists and dominates during the trading session rather than being fully priced in at the open.
Cross-Market Heterogeneity
- Singapore (STI): Shows the opposite pattern. The opening coefficient is larger in magnitude (−7.2 bp) than the intraday coefficient (−1.7 bp), suggesting "opening incorporation."
- Malaysia (KLCI) & Indonesia (JKSE): The KLCI coefficients are small and imprecisely estimated. The JKSE shows a mixed pattern with a larger opening coefficient (−9.8 bp) than intraday (−6.8 bp), though the difference is not statistically significant after adjustment.
- Direct Comparisons: On common trading dates, the allocation difference between Vietnam and Singapore is 17.3 bp ( $p=0.003$ ), and between Vietnam and Malaysia is 12.8 bp ( $p=0.006$ ). This confirms that the timing of the association is structurally different between Vietnam and these neighboring markets.
Robustness Checks
- Results remain robust after excluding "stale" opening prices (where the open is within 0.5 bp of the previous close), using independent data sources (SSI iBoard, KBSV) for disputed openings, and adding contemporaneous regional index and in-session crypto returns as controls.
- The intraday dominance in Vietnam persists across the first and second halves of the sample period.

Key Contributions

Decomposition of Daily Returns: The paper moves beyond standard close-to-close analysis to separate opening and intraday returns. This reveals that a single daily coefficient can mask significant heterogeneity in when price discovery occurs.
Market-Specific Timing: The study documents that the association between overnight crypto downside and equity returns is not uniform. In Vietnam, the signal is primarily realized during continuous trading, whereas in Singapore, it is largely incorporated at the open.
Methodological Rigor: The use of an automated, reproducible pipeline and strict statistical adjustments (Holm, joint HAC, bootstrapping) ensures that the observed differences are not artifacts of data handling or multiple testing.

Significance and Claims
The paper claims to document where the association between overnight cryptocurrency downside and equity returns appears within the next trading session and how this timing varies across Southeast Asian markets.

Information Content: Separating opening from intraday returns adds information that a total daily coefficient cannot provide. For Vietnam, relying solely on an opening-gap analysis would miss approximately 86% of the association.
Market Microstructure: The findings suggest that market mechanisms (e.g., opening auctions vs. continuous trading, investor participation, and information diffusion) differ significantly across the region, leading to distinct price formation dynamics.
Limitations: The authors modestly note that while they identify when the association occurs, the study does not pinpoint the exact origin of the information or the specific trading mechanisms driving the differences. The results describe conditional associations in the specific sample period and do not guarantee the profitability of trading strategies, which would depend on transaction costs and liquidity.

In conclusion, the study extends existing literature by demonstrating that the same overnight cryptocurrency signal can be associated with different phases of the equity trading session depending on the specific market's microstructure.

Technical Summary: Overnight Cryptocurrency Downside and Opening versus Intraday Equity Returns in Southeast Asia

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