Overnight and Intraday Returns in US Equities

Summary

This analysis revisits whether SPY’s returns accrue mainly overnight or during regular trading hours. It calculates intraday returns from each session’s open to close and overnight returns from the prior close to the next open, then compares their cumulative paths using historical price data. The author reports that most cumulative gains in the sample came overnight, along with the largest negative returns, and that the pattern appears stronger when adjusted prices are used.

The proposed explanation is that investors may earn a premium for bearing exposure when the cash market is closed and hedging is harder. The article also mentions a separate paper reporting that nearly all equity index futures returns occurred in a particular overnight hour, but leaves that claim for future investigation. The analysis is descriptive: it focuses on one ETF and does not establish causation, test a trading strategy’s costs, or show whether the pattern persists in other markets or periods.

Key ideas

• The article separates SPY returns into close-to-open overnight returns and open-to-close intraday returns.
• Most cumulative gains in the sample occurred overnight, as did the largest losses.
• The author suggests that overnight returns may compensate investors for harder-to-manage exposure.
• Adjusted prices show a more pronounced overnight pattern in the presented analysis.
• A cited futures result about returns concentrated in one overnight hour remains unverified here.

Tags

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