The Overnight Drift

86 Pages Posted: 2 Mar 2020 Last revised: 9 Sep 2021

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


This paper documents large positive returns to holding U.S. equity futures overnight during the opening hours of European markets. Consistent with models of inventory risk and demand for immediacy, we demonstrate a strong relationship with order imbalances arising at the close of trade from the previous U.S intraday session. Rationalizing unconditionally positive “overnight drift” returns, we uncover a strong asymmetric reaction to demand shocks: market sell-offs generate robust positive overnight reversals while reversals following market rallies are much more modest. We argue that this demand shock asymmetry is consistent with time-variation in dealer risk bearing capacity.

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, Rev. September 2021, 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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