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Investing Research Articles

47 Research Articles

Intraday Versus Overnight Option Returns

Are overnight option returns consistently different from intraday returns? In their July 2016 paper entitled “Why Do Option Returns Change Sign from Day to Night?”, Dmitriy Muravyev and Xuechuan Ni decompose the negative risk premium of S&P 500 Index options into intraday (open-to-close) and overnight (close-to-open) components. They apply delta hedging to distinguish the options premium from movement in… Keep Reading

Overnight Momentum-informed Overnight Trading

Can investors refine and exploit the upward bias of overnight stock returns? In the July 2015 version of her paper entitled “Night Trading: Lower Risk but Higher Returns?”, Marie-Eve Lachance presents a way of sorting stocks by strength of overnight return bias and investigates gross and net profitability of associated overnight-only investment strategies. Specifically, she each month regresses daily… Keep Reading

Recent Overnight-Intraday Stock Return Correlations

Do intraday U.S. stock returns still tend to reverse preceding overnight returns as found in prior research? In their August 2018 paper entitled “Overnight Return, the Invisible Hand Behind The Intraday Return? A Retrospective”, Ben Branch and Aixin Ma revisit prior research on the relationship between overnight and intraday returns of U.S. stocks. Specifically, they relate average… Keep Reading

SPY by Day of the Week and Overnight

Does the broad U.S. stock market, as represented by SPDR S&P 500 (SPY), exhibit reliable day-of-the-week and/or overnight return anomalies? To check, we consider three returns: Close-Open: measured from prior close to open. (For example, the Monday Close-Open return is from the close on the prior trading day, usually Friday, to the open on Monday.)… Keep Reading

Trade Against Overnight Moves?

…the overnight return on individual stocks is a contrary indicator for next-day returns, but individual “outside” traders may not be able to exploit this tendency.

SACEMS with Overnight Return Capture

In view of research indicating that overnight (close-to-open) returns are on average significantly higher than open-to-close returns, a subscriber proposed an enhancement to the Simple Asset Class ETF Momentum Strategy (SACEMS), as follows: Instead of ranking SACEMS assets at the market close on the last trading day of each month, rank them at the open…. Keep Reading

Daily, Overnight and Intraday VIX Tendencies

Does the S&P 500 options-implied volatility index (VIX) exhibit predictable daily, overnight and intraday tendencies? In their September 2012 paper entitled “What Makes the VIX Tick?”, Warren Bailey, Lin Zheng and Yinggang Zhou employ high-frequency data to investigate patterns in VIX behavior and measure relationships between VIX and various financial fundamentals, economic announcements and investor… Keep Reading

Momentum Happens at Night?

Are overnight trading motivations systematically different from those that drive trading during normal trading hours? In the January 2015 version of their paper entitled “Tug of War: Overnight Versus Intraday Expected Returns”, flagged by a subscriber, Dong Lou, Christopher Polk and Spyros Skouras (1) decompose abnormal returns associated with well-known stock return predictors into overnight and intraday… Keep Reading

Overnight/Intraday Return Reversal Trading

What is the best way to exploit short-term asset return reversal? In their November 2015 paper entitled “Market Closure and Short-Term Reversal”, Pasquale Della Corte, Robert Kosowski and Tianyu Wang examine four short-term reversal strategies that are each day long (short) assets with below-average (above-average) past returns weighted according to the degree the returns are below (above) average. Portfolio long… Keep Reading

Buy at the Close and Sell at the Open?

…both individual stocks and broad funds have, on average, appreciated overnight and stalled or declined during the trading day over the past 14 years. The first hour of trading may be the worst hour.