Investing Research Articles

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

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

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

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

Do intraday (open-to-close, trading-driven/technical) and overnight (close-to-open, news-driven) stock returns play different roles in signaling short-term reversal, intermediate-term momentum and long-term reversion? In their March 2022 paper entitled “What Drives Momentum and Reversal? Evidence from Day and Night Signals”, Yashar Barardehi, Vincent Bogousslavsky and Dmitriy Muravyev investigate by relating past cumulative daily, intraday and dividend-adjusted… Keep Reading

…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.

Over at least the past three decades, 100% or more of the return (0% or negative return) on a wide range of risky assets occurs when markets are closed (open). Is this overnight effect important to investors? In their June 2022 paper entitled “Night Moves: Is the Overnight Drift the Grandmother of All Market Anomalies”,… Keep Reading

Does the overnight return effect found pervasively among equity markets, as summarized in “Persistence of Overnight/Intraday Equity Market Return Patterns”, also hold for other asset classes? To investigate, we compare open-to-close (O-C) and close-to-open (C-O) average returns, standard deviations of returns and cumulative performances for the exchange-traded funds (ETF) used as asset class proxies in… Keep Reading

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

What best explains the decades-long pattern of strong overnight and weak intraday returns in most equity markets? In his January 2022 paper entitled “They Still Haven’t Told You”, Bruce Knuteson reviews possible explanations for this pattern and identifies the most likely. His theoretical equity index benchmark is a random walk with slight upward drift (due… Keep Reading