The overnight return and the intraday return are two types of stock returns, which are price changes in a stock, that are labeled based on the time frame during which the return is measured. Overnight returns and intraday returns together serve as components of the total daily return, which measures the return realized from the close of trading one day until the close of trading the next day that the market is in session.
Overnight returns measure returns when trading is not in session, marking the overnight time frame between the close of one trading day and the opening of the next one. Overnight returns reflect the fact that events that occur overnight, even while the market is closed, will affect the opening price of a stock, so that a stock price might rise or fall overnight.
Intraday returns, like overnight returns, track the returns over a short-term time period. Intraday return refers to the return that results during a single trading day. Intraday returns interest those, such as some active traders, who attempt to anticipate movements in the financial markets during the course of a single day, looking to purchase and sell securities between the opening and closing bell. Intraday returns are also sometimes called daytime returns.
Research studies have indicated that there is a small negative correlation between overnight and intraday returns. For instance, when overnight returns are strong, then intraday returns tend to be weaker, and when overnight returns are weak, then intraday returns tend to be a bit stronger. In the case of high overnight returns leading to lower intraday returns, the cause often is the price inflation of stocks at the opening of the trading day -- a price inflation caused by the strong returns overnight, according to "Statistical Analysis of the Overnight and Daytime Return," a 2011 study.
The intraday return has a larger impact on the total daily return than the overnight return component does, and it also shows a greater correlation between its results and the total daily return's results, though there also is a correlation between overnight returns and total daily returns, according to "Statistical Analysis of the Overnight and Daytime Return." Both the intraday and overnight returns' volatility aligns with the total daily return's volatility.
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