Karol Durdewicz

This image has gone mega-viral over the last 24 hours. If you bought Micron every day at market close and sold at market open, your return would be 138,330,342%. If you bought Micron every day at market open and sold at market close, your return would be -99.2%. I went down a rabbit hole to see if I could discover as to why this is. An earlier historical dataset from researcher Bruce Knuteson produced similarly extreme results for a number of individual stocks: • $MU: +16.2 million% overnight / -99.95% intraday • $HOLX: +15.9 million% / -99.98% • $NVR: +3.6 million% / -98% • $JBHT: +3.0 million% / -99.8% • $MGM: +2.6 million% / -99.96% • $NVDA: +221,715% / -51% Obviously, the exact numbers depend heavily on the period examined, but the pattern itself has been repeatedly documented. Research published in the Journal of Investment Management found that the phenomenon is particularly strong among high-attention stocks popular with retail investors, including names such as: $NVDA $TSLA $AMD $MSTR But here's what I didn't expect: Over the 30-year period examined in subsequent research, $1 invested in only during regular trading hours grew to roughly $1.20. The same $1 invested only overnight grew to approximately $17.27. So why does this happen? There are several theories. One of the most interesting involves when investors actually place orders. Retail investors often place orders during post or pre market hours. Those orders accumulate while the market is closed and are executed around the opening auction. That creates persistent buying pressure near the open, especially in popular, high-attention stocks. There are a few other possible explanations as well: • Earnings and major corporate news frequently arrive outside regular trading hours. • Investors require compensation for accepting overnight gap risk when they cannot immediately exit a position. • Institutional investors face different leverage, short-selling and financing constraints overnight. • Liquidity and price impact behave differently around the opening and closing auctions. • High-beta stocks appear to experience a particularly large day/night return split. Researchers still disagrees on how much each explanation contributes.