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San Diego State University

Fowler College of
Business Administration

Intellectual Contribution

Title
Night Trading: Lower Risk But Higher Returns?
Author(s)
Lachance, M.
Type of Research
Peer-Reviewed Journal Articles
Date Published
2015, Before July
Contribution Type
Discipline-based scholarship (basic research)
Contribution Category
A
Points
16
Publisher
Working Paper
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 recurring 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 have also implications for daytime investors as these stocks average negative returns intraday. Implementation costs and issues are discussed.