Eddy Elfenbein often comes up with cute ideas on how the market works, and this article is no exception.  Someone holding the stock market overnight, at least over the past decade, does better than someone owning stocks during the day.  (I assume that  Eddy has made the proper corrections for dividends, and things like that.)  Now, why might this be?  This is my theory: though daytraders are a part of this, it is not that we are all a bunch of daytraders, but that enough players in the market view the daylight hours as less risky than the night, because they can’t trade then.  Newsflow happens more often while the market is closed.  Thus, there is a tendency to clear out positions before the session closes.  (Now, no net position clearing occurs.  Someone has to hold the stock overnight; they receive a slight discount in the price to do it.)

Another way to think about it is that people get paid to take risk, and there is risk in holding stock overnight.  Now, if we wanted to test this hypothesis, there is even more risk holding stock over the weekend.  How do the overnight returns vary overnight, versus over multiple nights?  Perhaps Mr. Elfenbein can run that calculation as well.