Overnight Effect Important for Investors?

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”, Victor Haghani, Vladimir Ragulin and Richard Dewey briefly review the dozen or so papers exploring this effect, mostly focused on broad stock market returns. They then take a closer look at whether the effect applies to individual U.S. stocks and discuss implications for investors. Using results of past research and overnight and intraday prices for selected exchange-traded funds (ETF) and stocks as available since the mid-1990s through May 2022, they find that: (more…)