More than all of the positive returns to the world’s major stock market indices over the past three decades occurred overnight.

These extraordinary plots [1,5,6,7] are suspicious. No variation of “returns are due to the bearing of risk” can explain the significantly negative intraday returns in these plots. The uncoordinated actions of millions of individual traders should not produce such strikingly consistent return patterns.

Overnight and Intraday Returns to Major Stock Market Indices

Frequently Asked Questions

Are these plots because most price discovery happens overnight?

No [1]. Most price movement happens intraday.

Do these plots have some other innocuous explanation?

All innocuous explanations so far proposed have serious problems [1].

Is the explanation in [1] a conspiracy theory?

No. According to Wikipedia: “A conspiracy theory is an explanation for an event or situation that invokes a conspiracy by sinister and powerful groups, often political in motivation, when other explanations are more probable.”

The literature currently contains no plausible alternative explanations for these plots. The explanation in [1] is not political in motivation. “Nerdy and scared” describes most of the quant perps in [1] more accurately than “sinister and powerful”. The explanation in [1] is easy for regulators to check.

Is the explanation in [1] crazy?

No. These plots are crazy, but there they are. You can reproduce them yourself [5]. The story in [1] is a straightforward, sane explanation of these crazy plots.

Is the explanation in [1] complicated?

Not really. This explanation is provided in varying levels of detail in [4,3,2,1], written in 2016, 2018, 2019, and 2020, respectively. The main text of these articles are only 1, 2, 3, and 2 pages, respectively.

What does all this mean for me?

  • If you are an investor and there is something suspicious in one of your investments that you don’t understand, you should probably get out.

    • If you are a regulator responsible for the integrity of a market in which there are highly suspicious return patterns, you should figure out whose trading caused them. Failing to do this puts you at risk of severe public embarrassment. (Hindsight is 20/20. People armed with this hindsight will not be sympathetic.)

  • If you are a finance/economics/business journalist/blogger/pundit, you should alert your readers to these suspicious plots as a potential problem. Failing to do this puts you at risk of severe professional embarrassment. (You were either ignorant of these plots, failed to recognize them as a problem, or chose to not tell your readers about the problem. None of these scenarios is good for you.)

  • If you are a money manager on record as being aware of this issue, you should alert your investors to this matter as a potential problem and reallocate their funds appropriately. Failing to do this gives your investors better grounds for suing you than you probably want to provide.

  • If you are on record as being in some way involved in the trading described in [1], you should raise this issue as a matter of concern to your manager (on the record, multiple times) or an appropriate regulator. Failing to do this exposes you to criminal prosecution.

[1] Strikingly Suspicious Overnight and Intraday Returns (arXiv)

[2] Celebrating Three Decades of Worldwide Stock Market Manipulation (arXiv, SSRN)

[3] How to Increase Global Wealth Inequality for Fun and Profit (arXiv, SSRN)

[4] Information, Impact, Ignorance, Illegality, Investing, and Inequality (arXiv, SSRN)

[5] The code used to produce these plots is publicly available. Data are publicly available from Yahoo Finance (e.g., S&P 500 data).

[6] Where possible (i.e., except for the UK and China [1]), these plots show data through 2020-09-30.

[7] These plots (jpg, pdf, png) are also available in log scale (jpg, pdf, png). A standalone pdf plot for each index is also available: Australia, Brazil, Canada, China, France, Germany, Hong Kong, India (Nifty 50, SENSEX), Israel, Italy, Japan, Korea, Mexico, Netherlands, Norway, Singapore, Taiwan, UK, US (S&P 500, NASDAQ, log scale, individual stocks). You are welcome to share or use any of these plots. Please link back to this site for reference.