Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

They say that stocks go down during the day and up at night

statmodeling.stat.columbia.edu

Post reply on HN
Print view View original

31–40 of 154 posts

Re: They say that stocks go down during the day and up at night

#31

Post by kgwgk »

intronic wrote: post #25
kgwgk wrote: post #23

Earlier quoted context omitted.

Settlement is when you actually own the stock you bought and the seller actually gets your money. That happens a couple of days after the trade. In the meantime it’s just “as if” but not quite and that has practical consequences. For example you can’t take your money out of the brokerage account until it’s really there.

Thanks! I was figuring this out just now as well thanks. The analysis is flawed if it doesn't include this as the gains they describe seem essentially unrealisable. So is the real issue that maybe someone has immediate settlement when the rest don't?

That would be an issue only a few days per year - and not at all for stocks not paying dividends.

Re: They say that stocks go down during the day and up at night

#32

Post by dgacmu »

_if_ this actually holds... (1) "overnight" is longer than intraday: the NYSE on which AIG is traded is only open for 27% of the day (930-1600). That's not enough to explain the effect, though.

(2) many (most?) large companies announce financial results after market close. Assuming that's one of the long-term drivers of change, it makes sense there's more net movement when you include those.

Re: They say that stocks go down during the day and up at night

#33

Post by notahacker »

dTal wrote: post #22
helsinkiandrew wrote: post #19

There's a few (often contradictory) explanations for this. My favourite is: Things that can be sold quickly are safer (because you can sell them if bad news comes out) so are worth less than less liquid things, like holding stocks when the market is closed. So by holding stocks overnight you are being payed for taking on the risk by those selling them before closing.

So the stock goes up overnight because of the risk that... the stock will go down overnight? Surely if the risk was real, the stock would actually go down sometimes, and cancel out the "free lunch", and on average there would be no effect to explain!

The risk is real, but many people are risk averse enough to be prepared to take a small loss [or lesser profit] to avoid risk of a bigger loss in basically every market anywhere - that's why insurance is a thing!

And you could see an effect in some individual stocks of traders whose strategies rely on reacting to stuff fast allowing traders whose strategies don't to profit by risking holding onto the stock for at least several hours, even if the average effect was zero because a few other stocks did have bad news overnight giving the bagholders of those stocks big losses...

Re: They say that stocks go down during the day and up at night

#34

Post by twic »

ale42 wrote: post #12
4ggr0 wrote: post #10

Earlier quoted context omitted.

As someone who doesn't know much about stocks and trading - is it normal to keep stocks for only evening or evening -> morning, what about morning -> morning, or even longer timespans? Or is this the difference between trading and investing?

You can keep stocks only for milliseconds if you wish... (see e.g. https://en.wikipedia.org/wiki/High-frequency_trading ). And for the less extreme version there's day trading ( https://en.wikipedia.org/wiki/Day_trading ) where you sell all your positions before the market closes (basically you try to speculate on intra-day changes of the stocks, so you keep them from minutes to hours). > Or is this the difference be…

I don't think trading is the same as speculating. To me, speculating is making big directional bets, eg "I think oil is underpriced right now, so i am going to buy loads of oil futures, then hope that in three months i can sell them at a much higher price". Whereas trading is usually much shorter-term and less directional, eg "I think French government bonds are overpriced relative to German government bonds right now, so i am going to get short French bond futures, buy an equivalent amount of German cash bonds, then hope that in a couple of days i can unwind that for a profit". And investing is "people like to drink Coca-Cola, so i will buy shares in the Coca-Cola company".

But i don't think there are hard and fast definitions.

Re: They say that stocks go down during the day and up at night

#36

Post by notahacker »

russellbeattie wrote: post #11

So am I understanding this correctly that massive algorithms are shorting stocks first thing in the morning - like in the first few seconds of trading - and then consolidating their positions before close. They basically can do this regularly essentially guaranteeing returns that the rest of us aren't able to take advantage of. And the SEC's lack of enforcement has allowed this practice to continue for the past decad…

More or less the opposite: stock sold off cheaply in the evening got sold for more in the morning. Probably algorithms involved in selling, but more likely they were prepared to take lower returns to not risk holding AIG overnight rather than as some sort of market manipulation strategy

But the main factor in the divergence in that chart in 2008-9 - as one of the comments points out - is that AIG announced a lot of bad news during the financial crisis during the daytime but never collapsed overnight.

Re: They say that stocks go down during the day and up at night

#37

Post by [deleted] »

bryanrasmussen wrote: post #2

Since the article is not very informative, and it's a real rabbit hole to try to track this stuff down across all the linked articles etc. and as I don't even really care about stocks and the market, I am only left with one question which I did not find answered anywhere yet - what exactly does day and night mean in the context of the whole world trading?

[deleted]

Re: They say that stocks go down during the day and up at night

#38

Post by devnullbrain »

twic wrote: post #28
TeMPOraL wrote: post #17

Earlier quoted context omitted.

> I am only left with one question which I did not find answered anywhere yet - what exactly does day and night mean in the context of the whole world trading? While we're at it, I have a related question: why do the exchanges even "open" and "close"? Surely in our globalized digital economy, it's not just "day" and "night" that are meaningless, but the very concept of "opening hours" itself.

Historically, it's because exchanges were real places that people went to, and it would be expensive and pointless to run them all night. These days, there is a trend towards opening hours getting longer (eg [1]). But there is still value to limited hours. Off the top of my head: 1. Liquidity gets concentrated. If there is a fixed amount of end-user demand (inflows into pension funds, oil production to hedge), then s…

>Closing the market gives participants time to do various kinds of admin related to trading.

Trading firms can restart their software to fix the memory leaks.

Post reply on HN