The Nighttime Bitcoin Anomaly: Why Markets Move While You Sleep

A famous financial anomaly reveals that the stock market mostly goes up when it's closed. Over at least the past three decades, investors have earned 100% or more of the return on a wide range of risky assets during overnight hours, while earning zero or negative returns during the daytime when markets are open. This means stocks tend to open higher than they closed the previous day and then decline slightly during trading hours.

Nobody quite knows why this happens. Bruce Knuteson has a notable theory, detailed in papers with titles like "Strikingly Suspicious Overnight and Intraday Returns," suggesting that quantitative trading firms might conspire to inflate prices every morning and deflate them every evening. On the other hand, a more intuitive assumption is that because US public companies often avoid releasing information during market hours, most fundamental information that drives long-term stock growth is released and processed at night. However, this idea lacks rigor and isn't widely accepted.