This paper investigates the effects of infrequent trading and overnight trading halts on the overnight and daytime returns behavior. Previous empirical studies of market microstructure document the variance and covariance structure of intra- and inter-day stock returns. Many of them try to explain their findings by bid- ask spread. This study, however, explains it by the effects of infrequent trading and overnight trading halts. A model is developed for explaining various returns behavior based on the existence of infrequent trading and overnight trading halts. Empirical evidence is presented for KOSPI All Share, Large Cap, Small Cap indices. The empirical results confirm the validity of the model proposed in this study.