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Investing Research Articles

60 Research Articles

Live Test of the Stock Market Overnight Move Effect

Is the stock market overnight move effect exploitable? To investigate, we look at performances of two recently launched 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)…. Keep Reading

Combining Overnight and TOTM Effects

With reference to “Turn-of-the-Month Effect Persistence and Robustness” and “Persistence of Overnight/Intraday Equity Market Return Patterns”, a subscriber asked about a strategy that is long SPDR S&P 500 ETF Trust (SPY) only from market close to market open during the turn-of-the-month (TOTM). To investigate, we consider three strategies: TOTM Close-to-Open: long SPY from close-to-open during… 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.

The Lure of Trading at the Open?

…evidence from a fairly large recent sample of U.S. stocks indicates that traders may be able to suppress trading friction by systematically executing sales at the open and buys later in the trading day.

Middle-of-the-Night Stock Market Gains

Has 24-hour trading of equity index futures created a reliable pattern in hour-by-hour returns? In their February 2020 preliminary paper entitled “The Overnight Drift”, Nina Boyarchenko, Lars Larsen and Paul Whelan study round-the-clock U.S. stock market performance decomposing S&P 500 Index futures returns by hour, with focus on dealer inventory management. Using 24-hour high-frequency trades… Keep Reading

Intraday Stock Price Momentum and Reversal Trading

Are there profitable intraday stock price momentum and/or reversal strategies? In his January 2017 paper entitled “Intra-Day Momentum”, Oleg Komarov examines the profitability of intraday times series (intrinsic or absolute) and cross-sectional stock price momentum and reversal strategies. Time series strategies involve predicting the behavior of a stock based on its own past return. Cross-sectional strategies… Keep Reading

Tug-of-war Risk and Future Stock Returns

Does persistence in the difference in direction between overnight stock trading and intraday stock trading behaviors (tug of war) predict future returns? In their January 2019 paper entitled “Overnight Returns, Daytime Reversals, and Future Stock Returns: The Risk of Investing in a Tug of War with Noise Traders”, Ferhat Akbas, Ekkehart Boehmer, Chao Jiang and Paul Koch investigate… Keep Reading