When Local Markets Close but the World Keeps Trading: Global Information Absorption at Market Reopening

Abstract

What happens to global information when a local equity market is closed but foreign markets continue to trade? We use exchange-calendar differences to construct UTC-stamped information windows from the last local close before a closure to the local reopening. Verified closure episodes are compared with continuously traded pseudo-closure windows of identical calendar length, matched on the magnitude and sign of the foreign shock, global risk, seasonality, and pre-event domestic volatility. In 809 matched episodes for the Nikkei 225, FTSE 100, DAX, and S&P 500, the closure-by-foreign-return interaction is 0.631 (standard error 0.064) for the reopening-day return but -0.018 (0.062) for the cumulative calendarequivalent return. Closure therefore changes when information enters local prices in every audited market, although the magnitude differs. The pooled cumulative effect is near zero, but formal heterogeneity shows attenuation outside Japan (-0.184, p=0.005) and a positive Nikkei differential (0.293, p=0.005). In the audited DAX–Nikkei opening subsample, the differential reopening loading splits between the opening gap (0.367) and the subsequent session (0.390). Absolute foreign variation also raises the absolute reopening response; the interaction is 0.260 (0.080) and survives multiplicity adjustment and conditional permutation diagnostics. The evidence supports deferred price discovery and uncertainty concentration, but not general temporal insulation. The timing result survives synchronizedclosure, weekend-structure, and within-year calendar falsifications. Because a prespecified delayedforeign-return diagnostic rejects, however, the estimates are interpreted as timing and predictive evidence rather than a causal welfare effect of closure.

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