The Stock Market Works by Day, but It Loves the Night (Published 2018) (2024)

The daytime is for losers. Overnight is when the big money is made in the stock market — not by trading but by getting a good night’s sleep.

That’s because of a gap between daytime and overnight returns in the American stock market. The real profits for investors have come when the market is closed for regular trading, according to a new stock market analysis by Bespoke Investment Group.

The Bespoke data builds on the findings of academic researchers, who have documented the existence of the gap, without being able to entirely explain its cause.

“We can show that the gap exists,” said Huseyin Gulen, a finance professor at Purdue University who has written about the issue. “But at this point we don’t know exactly why.”

Simply put, the gap may be defined as the difference between stock returns during the hours the market is open, and the returns after regular daytime trading ends. How the gap is calculated may not be intuitively obvious, though.

One set of returns is straightforward: It is based on prices at the start of trading in New York at 9:30 a.m. to the market close at 4 p.m. The second set is, essentially, the reverse: It is price returns from the 4 p.m. close to the market opening at 9:30 a.m. the following day.