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Night trading: Lower risk but higher returns?

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  • Marie‐Eve Lachance

Abstract

This paper demonstrates that overnight returns are subject to highly persistent biases and examines the profitability of overnight‐only investments in that context. Overnight returns tend to exceed their intraday counterparts, and the paper first reconciles these patterns by introducing a model that factors in systematic biases. This model identifies one‐fifth of stocks as having positive and statistically significant overnight biases. Investing overnight in these stocks in the next year yields twice the market's return for a third of the market beta. Results also have implications for daytime investors as these stocks underperform intraday. Implementation costs and issues are discussed.

Suggested Citation

  • Marie‐Eve Lachance, 2023. "Night trading: Lower risk but higher returns?," Review of Financial Economics, John Wiley & Sons, vol. 41(4), pages 347-363, October.
    • Handle: RePEc:wly:revfec:v:41:y:2023:i:4:p:347-363
    DOI: 10.1002/rfe.1180
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    References listed on IDEAS

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    Cited by:

    1. Xie, Jun & Xia, Wenqian & Gao, Bin, 2025. "Overnight information and anomalies," Research in International Business and Finance, Elsevier, vol. 78(C).

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