Why do stocks gains come at night?

THE tendency of stocks to produce all their gains at night, when markets are closed, and systematically lose money during the daylight hours, has baffled researchers for four decades and potentially put retail investors at a disadvantage.

The debate over what drives this behaviour will surely be revived by the award of the prestigious Harry Markowitz prize for the best paper of the year in investment management to Victor Haghani, Vladimir Ragulin and Richard Dewey for Night Moves: Is the Overnight Drift the Grandmother of All Market Anomalies?

In 22 of 24 countries, investors would have lost money since 1990 holding the major stock market index only from market open to market close – selling at the close and buying back at the open – even without transaction costs. The losses were not small; in seven countries they were over 90 per cent of capital. All the substantial gains in global stock markets came from holding stocks overnight, from market close to the next day’s open. If you want to check your own portfolio, the paper’s authors have made an online calculator available.