This is such a horribly clickbait title. Please edit or remove itReply
important news is often released b4 market open or after close, or pundits will hype the stock over the close.
Manipulation, such as gapping the price higher or lower to make profit from options or increased liquidity of regular trading hours. So you spend $10 million in the pre-market hours to make a stock open 5% higher and then use the extra liquidity to unload a $100 million position at the open while also selling calls.Reply
Honestly? I blame the reptilians for this.Reply
People tend to point out how much energy cryptos consume, is there an estimate for how much high frequency trading consumes world wide?Reply
Does this mean I should sell more often in the morning than in the afternoon?Reply
> Figure 2 shows plots of overnight and intraday returns for twenty-one major stock market indices around the world. Turn the page and compare Figure 1 with Figure 2. See if you can tell a difference.
These images... do not render well on my machine, to put it lightly. So they look remarkably similar to me. Perhaps the author could spell out what this difference is? There is eventually mention of "striking similarity in the overnight and in- traday return patterns in the indices around the globe," but I don't think I'm ready to conclude that strong correlation of phenomena across markets in a global economy must be caused by a collection of manipulators acting on all of those markets.
I'm curious to see what others have to say, since I lack the hardware and background to properly read this document.Reply
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.Reply
This title is peak click bait. I don’t think you could’ve made it more clickbaity if you tried.Reply
Am I blind or does this paper spend a huge amount of time lamenting the failures to notice the issue, without ever once actually describing the issue. I don't claim to be very knowledgable here, so can someone fill in the gaps for those of us who want to know exactly why Fig 2. is so damning?Reply
This is a really poor use of the arXiv.
Here's a discussion of the same phenomenon that provides some explanations that aren't "a shadowy trading firm is propping up prices by painting the tape at open":
To be honest, the author's strategy could really be happening: some market player (or players) may be aggressively buying up stocks at open and selling them throughout the day at a loss so that the overnight gains positively impact their much larger buy-and-hold tranche of the same stocks. So what? Not only would they be taking on a risk premium by holding that larger slice of stocks overnight, but they're also opening themselves up to massive tail risk. A strategy like this works by taking advantage of the change in order book depth throughout the day to pump up P/Es. P/Es will eventually come back down. When that happens, who knows whether the crash'll start during a trading session or overnight. It reduces into a market timing strategy. This "paper" is ridiculous.Reply
What are the implications if this is true?Reply
Lots of condescension here, but supposing that overnight returns are in fact on average substantially greater than intraday returns, what is the layman-friendly, non-conspiracy-theory explanation of this phenomenon?Reply
There are so many questions waiting to be answered. He's plotted intraday versus overnight returns and showed that the former are larger. He claims this is evidence of market manipulation because overnight positions should be less risky. So demonstrate that by plotting the volatilities! There's no mention of observed volatility in either paper. I'd be willing to bet the overnight vols are correspondingly higher.
An interesting result -- but not worth the hot air.Reply
TL;DR, a lot of hedge funds don't hold positions overnight.
This paper reads more like some click bait article on BuzzFeed or Business Insider than an academic piece.Reply
Clickbait paper titles on arxiv, good grief. Out of curiously I looked the guy up -- he must have gotten access via some technical publications ~a decade ago. There ought to be away to cut off access to people who are no longer publishing in their field of expertise.Reply
> Fortunately, the other sentences in footnote 78 contain no words that start with v, so we should be able to take them at face volume.
I saw lots of charts & graphs & flashy wordsmithing, but I didn't actually see any evidence or examples of firms doing unscrupulous trades.
I'm not an expert, but I know better than to dish it out better than I can take it. My opinion is that these "exemplary" market returns are simply the result of markets being open only part of the day: between 0930h and 1600h there's liquidity to buy/sell your position at any time, for the prevailing price. Markets are open only 7h of the day but 24h worth of events takes place each day.
The other elephant in the room is that all market participants know the trading hours. Much news, releases, events, etc. happen outside of the liquid trading hours, resulting in discrete jumps between the close of one day and the open of another.
These are also cumulative returns over a huge timespan: everybody knows the fed can crash the markets mid-day with the wrong jawboning. the reverse price effect can also be true, resulting in huge open-to-close changes.Reply
Can someone explain for a total layman?Reply
> one or more large, long-lived quant firms tending to expand its portfolio early in the day (when its trading moves prices more) and contract its portfolio later in the day (when its trading moves prices less), losing money on its daily round-trip trades to create mark-to-market gains on its large existing book.
Renaissance Technologies' Medallion Fund?
Simons is a genius.Reply
So he is saying large firms use money to pump up prices early morning to promote FOMO and chaos and they would trade the predictable chaos and even after they sell their initial pump, they still make money?Reply