The early bird doesn’t just get the worm. It also gets the bulk of the stock market’s profits.
That’s because most of the S&P 500’s SPX, +1.44% gains occur overnight. The U.S. benchmark index on average barely gains while the New York Stock Exchange is open.
That’s the finding of a recently updated study entitled “Market Return Around the Clock: A Puzzle.” Its authors are Oleg Bondarenko of the University of Illinois at Chicago and Dmitriy Muravyev of Michigan State University.
The professors analyzed tick-by-tick trade data for S&P 500 E-mini futures between 2004 and 2018. Crucially, their data reflected trades outside the normal trading hours in which the NYSE is open. They therefore were able to measure the proportion of the stock market’s return since 2004 that was produced while the NYSE was closed.
The chart below illustrates what they found: Over the study period, all of the S&P 500’s net return was produced between 11:30 p.m. and 3:30 a.m. (Eastern time), during which its average return was 7.6% annualized. On average the rest of the time, the market produced a 0.8% annualized loss. Read more…..
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Fortune’s Carol Loomis discusses the U.S. economy with Warren Buffett at the Most Powerful Women Summit in Washington, D.C.