Attached you find a notebook comparing overnight returns with intraday returns for a bunch of 129 (mostly US) ETFs. I was interested whether:
- there is evidence that overnight returns are higher than intraday returns
- the classifiaction of the ETF (e. g. large-cap or developed country) plays a role
- there is a difference in behavior during earnings season
- how much upwards movement is actually possible
- there is autocorrelation in overnight returns and cross-sectional correlation with intraday returns
I found that the average overnight returns were higher than intraday returns for almost every year (for the period from 1995-2016). Furthermore, I noticed that developed countries with only partially overlapping trading hours with the US market show a different pattern than all other ETF categories. Even tough the earnings annoucement are all after the close of the markets I didn't find any evidence for seasonality in the overnight returns. The analysis of the different deciles indicated that the bottom deciles don't have substantially negative returns, whereas the top decile had with annual returns of generally above 30%, relatively high overnight returns. Finally, I found evidence for positive autocorrelation and cross-sectional correlations with monthly intraday returns for monthly overnight returns. Looking at daily returns lead to the conclusion that the autcorrelation of overnight returns is negative whereas the cross-sectional correlation with daily intraday returns in positive for various lags.
Please note that the prices used were taken from Yahoo to account for dividends and splits, since I started my workings before the Quantopian update allowing to get adjusted prices in the research environment.