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The Overnight Drift in U.S. Equity Returns

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Abstract

Since the advent of electronic trading in the late 1990s, S&P 500 futures have traded close to 24 hours a day. In this post, which draws on our recent Staff Report, we document that holding U.S. equity futures overnight has earned a large positive return during the opening hours of European markets. The largest positive returns in the 1998–2019 sample have accrued between 2 a.m. and 3 a.m. U.S. Eastern time—the opening of European stock markets—and averaged 3.6 percent on an annualized basis, a phenomenon we call the overnight drift.

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  • Nina Boyarchenko & Lars C. Larsen & Paul Whelan, 2021. "The Overnight Drift in U.S. Equity Returns," Liberty Street Economics 20210526, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:92064
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    Keywords

    overnight drift; inventory risk management; daylight savings time (DST);
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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