NightShares overnight ETFs NSPY and NIWM trailed their benchmarks SPY and IWM, with negative average daily returns but lower volatility (June 28, 2022–July 31, 2023; daily total returns; both funds later terminated; very short sample).
Is the stock market overnight move effect exploitable? To investigate, we look at performances of two exchange-traded funds (ETF) designed to exploit the effect:
NightShares 500 ETF (NSPY), which "seeks to return the night performance of a portfolio of 500 large cap U.S. companies." The benchmark is SPDR S&P 500 ETF Trust (SPY).
Because available samples are short, we focus on daily return correlation with the benchmark, average daily return, standard deviation of daily returns and daily reward/risk (average daily return divided by standard deviation of daily returns). We also look at compound annual growth rates (CAGR) and maximum drawdowns (MaxDD) based on daily data. Using daily total returns for NSPY, NIWM and benchmarks during June 28, 2022 through July 31, 2023, we find that:
Morning Momentum and Afternoon Reversal for Stock Returns PremiumEqual-weighted long-short deciles formed on past afternoon returns earned higher gross monthly returns than conventional 1-month reversal (0.79% vs 0.48%), while morning-return ranking matched…
Overnight Effect Important for Investors? PremiumThe overnight-minus-intraday return gap in stock index ETFs and some individual U.S. stocks weakened over the past 5-10 years (1995-May 2022; 5-year rolling gross…
Overnight Effect Across Asset Classes? PremiumOvernight (close-to-open) returns exceeded open-to-close returns for most non-equity ETFs, strongest for EMB and VNQ and absent for TLT and EFA (SACEMS ETF proxies;…
Combining Overnight and TOTM Effects PremiumA SPY turn-of-the-month close-to-open strategy (long close-to-open only during TOTM, cash otherwise; eight round-trips monthly) earned 0.0% net CAGR with -39% MaxDD at 0.06%…
