Market Return Around the Clock: A Puzzle

Journal of Financial and Quantitative Analysis (JFQA), Forthcoming

70 Pages Posted: 27 May 2020 Last revised: 5 Aug 2022

See all articles by Oleg Bondarenko

Oleg Bondarenko

University of Illinois at Chicago - Department of Finance

Dmitriy Muravyev

Michigan State University - Department of Finance; Canadian Derivatives Institute

Date Written: April 28, 2020

Abstract

We study how the excess market return depends on the time of the day using E-mini S&P 500 futures actively traded for almost 24 hours. Strikingly, four hours around European open account for the entire average market return. This period’s returns are positive every year and have a 1.6 Sharpe ratio that remains high after costs. Average returns are a noisy zero during the remaining 20 hours. High returns around European open are consistent with European investors processing information accumulated overnight and thus resolving uncertainty. Indeed, uncertainty reflected by VIX futures prices rises overnight and falls around European open. The results are stronger during the 2020 COVID crisis.

Keywords: Market return, intraday data, uncertainty resolution, index futures

JEL Classification: G12, G13, G14

Suggested Citation

Bondarenko, Oleg and Muravyev, Dmitriy, Market Return Around the Clock: A Puzzle (April 28, 2020). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3596245 or http://dx.doi.org/10.2139/ssrn.3596245

Oleg Bondarenko

University of Illinois at Chicago - Department of Finance ( email )

2431 University Hall (UH)
601 S. Morgan Street
Chicago, IL 60607-7124
United States
(312) 996-2362 (Phone)
(312) 413-7948 (Fax)

Dmitriy Muravyev (Contact Author)

Michigan State University - Department of Finance ( email )

315 Eppley Center
East Lansing, MI 48824-1122
United States

Canadian Derivatives Institute ( email )

3000, chemin de la Côte-Sainte-Catherine
Montréal, Québec H3T 2A7
Canada

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