The Overnight Drift

61 Pages Posted: 2 Mar 2020 Last revised: 15 Jul 2020

See all articles by Nina Boyarchenko

Nina Boyarchenko

Federal Reserve Bank of New York

Lars Christian Larsen

Copenhagen Business School

Paul Whelan

Copenhagen Business School

Multiple version iconThere are 2 versions of this paper

Date Written: February 1, 2020


We show that nearly 100% of the U.S. equity premium is earned over a window around the opening hours of European markets when U.S. cash markets are closed. We explore two potential complementary explanations. First, consistent with predictions from dealer inventory risk models, we find (i) a strong negative link to end-of-day order imbalance; (ii) reversals are amplified in periods of high volatility; (iii) in recent years dealers have increasingly offloaded inventory during Asian trading hours. Second, shocks to end-of-day quantities of risk lead to increases in overnight expected returns.

Keywords: overnight returns, immediacy, inventory risk, volatility risk

JEL Classification: G13, G14, G15

Suggested Citation

Boyarchenko, Nina and Larsen, Lars Christian and Whelan, Paul, The Overnight Drift (February 1, 2020). FRB of New York Staff Report No. 917, February 2020, Available at SSRN: or

Nina Boyarchenko (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-7339 (Phone)
212-720-1582 (Fax)

Lars Christian Larsen

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000

Paul Whelan

Copenhagen Business School ( email )

Copenhagen Business School
Finance Department
Copenhagen, DC 1854

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