A-TIER resource
Overnight return anomaly — most stock gains accrue close-to-open
100k ft — What is this?
Overnight return anomaly — most stock gains accrue close-to-open
50k ft — Why care?
Cites research showing that across global markets most equity returns come overnight (close to next open) while intraday holding loses; the Micron example claims +138M% overnight vs −99% intraday on paper. Proposed mechanism: retail trades the open, institutions trade into the close. Paper not named; frictions and costs ignored.
10k ft — Key takeaways
• Close-to-open holding is a testable edge; costs and gap risk decide if it survives.
• Decompose any strategy's returns into overnight and intraday legs.
• Look up the 'tug of war' overnight-returns literature before trusting the headline numbers.
5k ft — Tools & techniques
(no tools tagged)
algorithmic trading, overnight vs intraday return decomposition
1k ft — Deep-dive / try it
If you sell before the bell everyday, you might be missing out on most of your gains.
A research paper found a strange phenomenon happing across the global stock market.
Apparently most of a stocks profit comes from overnight moves. Do your own research but this is still an interesting study.
Follow @eliteoptionstrader2 for more.
Not financial advice.
Transcript excerpt
If you bought Micron every day when the stock market closed and sold it the next morning when it opened, you'd be up over 138 million percent on paper. Now imagine you do the opposite. You bought every day when the market opens and you sold when it closed. That same Micron trade would be down over 99%. And apparently this isn't the only stock that does this. A research paper found a weird phenomenon across multiple markets across the world. It basically shows that if you buy stocks when the market closes and sell it the next morning when it opens, you're statistically most likely to gain profit. So what's going on? Two different crowds are trading at two different times. Individuals tend to trade smaller positions at the open while big institutions trade during the day into the close because that's where the most liquidity is. The paper says that trades earn their money while the markets closed and you're skipping the part that actually pays. Share this with a friend and make sure you follow for more.