Investigating Overnight and Intraday Returns in SPY and the S&P 500

Summary

The document compares cumulative overnight returns, measured from the prior close to the open, with intraday returns from open to close for SPY and the S&P 500 index. It reports that over the stated sample, SPY’s overnight performance was strongly positive while its intraday performance was negative; the index showed the reverse pattern. Repeating the SPY calculation with prices that exclude dividends still produced a positive overnight and negative intraday result, so dividends alone do not explain the reported difference.

The author describes calculating compounded session returns from daily open and close prices and plots the two series. This is a diagnostic comparison rather than a resolved explanation: the document asks why the ETF and index appear to differ but supplies no answer. It also does not establish that the series use identical price construction, timing, or return conventions. Those details, including ETF distributions, index methodology, and data-source treatment, would need checking before drawing conclusions about a tradable session effect.

Key ideas

• Overnight and intraday returns can show very different cumulative patterns.
• The document reports opposite session-return patterns for SPY and the S&P 500 index.
• Removing dividends from the SPY price series does not eliminate the reported pattern.
• Daily open and close prices can be used to compute compounded overnight and intraday returns.
• Differences in data construction and return conventions remain possible explanations to investigate.

Tags

# Overnight and intraday returns of stock index and ETF seem inconsistent


# Overnight and intraday returns of stock index and ETF seem inconsistent












Figure 2 of the 2019 paper "Celebrating Three Decades of Worldwide Stock Market Manipulation" shows that 29 Jan 1993 to 31 Oct 2019, overnight returns (from close to open) of SPY were 1232% while intraday returns (from open to close) were –14%.

Surprisingly, the opposite holds for the S&P500 index i.e. intraday returns beat overnight returns. To demonstrate this, we can download a file "^GSPC.csv" from Yahoo Finance and run this script:

```
import pandas as pd
import matplotlib.pyplot as plt
prices = pd.read_csv("^GSPC.csv", parse_dates = ["Date"]).set_index("Date")

indayRet = (prices["Close"] / prices["Open"]).cumprod() - 1
nightRet = (prices["Open"] / prices["Close"].shift(1)).cumprod() - 1

plt.plot(nightRet, label = "Overnight")
plt.plot(indayRet, label = "Intraday")
plt.legend(frameon = False)
plt.show()
```

Over the same period, cumulative overnight and intraday returns of S&P500 were 25% and 457% respectively.

Could dividends explain the opposite conclusions? They shouldn't because the returns of SPY and S&P500 both included dividends.

Anyway, I ran the same script for SPY prices without dividends, and found that cumulative overnight and intraday returns were 706% and –14% respectively.

#### Question

Why do intraday returns beat overnight returns for S&P500, while the opposite holds for SPY?

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.