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Comment by ksdale | Hacker News Reader

Seems to me like an easy explanation is that a whole ton of firms wouldn't want to hold anything overnight because you can't respond to it until the next morning? So they pile in in the morning, and exit in the afternoon.

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You clearly didn't read the abstract. There's obviously a conspiracy and if any of this is news to you, it is because the people you trust to alert you to such problems still haven’t told you.

Only Bruce knows the truth!!!

Bruce should make a newsletter so they can sell some branded mugs

Please properly open your sarcasm with a tag before closing it because my AI now thinks everything is a conspiracy.

This would make tons of sense with regard to actual HFT firms. If you're whole schtick is doing stuff over timescales that are (far) shorter than a minute, being locked into a position for hours is risk you really don't want to take.

Exactly, the randomness of overnight would completely erase the consequences of a day full of miniscule trades.

Yeah this is so obvious I would hope it could be controlled for by the Analyst. There are simply a lot of funds and traders who, by policy, do not hold positions overnight.

Shades of Slartibartfast: "... Anyway, the recession came, so we decided to sleep through it."

No, since expected intraday gains are negative, this would be a losing strategy. Closing price seems to be lower than opening price on average.

The suggested explanation is: buy orders are placed before open, raising opening price. The gains on the holdings are then larger than the cost of buying in the opening, and selling during the day.

The market goes down during the day, that isn't the same thing as everyone losing money during the day. On net, all of the market participants lose money, but this is still consistent with sophisticated financial firms making money off of trading with big actors who are less price sensitive and retail traders.

but this article is explaining that unless you are selling short in the morning and covering at night, there are mostly negative returns for intraday trading, i.e. "pil(ing) in in the morning, and exit(ing) in the afternoon".

There are lots of firms and funds and floors that never hold overnight, but this research demonstrates that that is basically a statistically losing strategy. If you follow markets it's almost impossible to not notice that almost all the real action happens after hours, and the day's trading tends to "erase" whatever happened overnight. Bruce's research is hard to contradict, unless the data is wrong or his formulae or off.

Or does it just feel that way because overnight as much is happening in the real world as during the day, but nothing is happening in the stock-market? Then when morning comes a lot happens in the stock-market to sync it with the state-change overnight.

I think the issue with this is that one person's loss is another person's gain. Lots of people lose money during the day, but it's not generally the very sophisticated hedge funds and HFT people.

And if you were to hold overnight, you'd have to sell in the morning, and the volume of overnight trading isn't high enough to support a bunch of big firms buying into overnight trading and selling at open, they'd all sell into a disaster, which would make overnight returns go away?

This makes sense to me as given a constant rate if information per hour from world markets and the world in general, there will be more information outside of trading hours than within them.

I'm not sure there is "more information" about the value of a stock. There is only newer information.

The new information during the night can tell us "Hey the price should be higher" but then more information coming in later can cancel the previous good news.

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