Who Holds Stocks Overnight and Why

Summary

The document explains why stock positions remain open overnight even when some day traders prefer to close before the market shuts. Long-horizon investors and institutions—including mutual funds, private individuals, and bank portfolios—may hold shares as part of their broader investment or trading activity. Overnight ownership is therefore a routine consequence of differing strategies and time horizons, rather than a specialized activity that must be undertaken by a dedicated overnight-only bank.

It also points out that frequent selling and repurchasing incurs the cost of crossing the bid–ask spread, which can make holding through the close preferable for investors who are not focused on intraday trading. A separate idea is to study returns by dividing them into intraday and overnight components, then form stock baskets intended to capture an overnight return pattern. The document offers no data or evidence that such a pattern is profitable, and it does not describe how to test or manage that strategy. Avoiding overnight exposure and seeking overnight returns are both possible choices, depending on the strategy and its costs.

Key ideas

• Long-horizon investors, banks, mutual funds, and individuals can all hold stocks overnight.
• Closing and reopening a position can incur bid–ask spread costs.
• Returns can be separated into intraday and overnight components for analysis.
• An overnight basket strategy is mentioned, but the document provides no evidence of profitability.

Tags

# Who holds stock overnight?


# Who holds stock overnight?












I have heard from several different sources, e.g. professors, books and traders, that daytraders and quants avoid holding positions overnight and during holidays and weekends. Instead, they sell their positions late in the day and buy it back in the morning. The reason is supposed to be that the trader wants to avoid the exposure to "bad news" during a time he can not act.

But if that is so, someone must be ready to buy those stocks to hold them over night. Who does that? And for what purpose? Are there banks that hold postitions overnight only, as a strategy?

## Answer by Richi Wa (score 1)

https://quant.stackexchange.com/a/16052

There are players in the market who do keep long term positions in stocks: - banks in their bank book - banks in their trading book - mutual funds - private persons on their accounts

I assume that everybody who is not specialized in day trading only usually holds stocks overnight because with every buy/sell the trader goes through one bid and one offer which can be costly.

## Answer by Kyle Balkissoon (score 0)

https://quant.stackexchange.com/a/16063

You can decompose price/returns into an intraday and overnight effect and hold baskets that may be profitable (or expected) overnight.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

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