Jul 3, 2022

Nightshares ETFs



An innovative company has launched two ETFs to captures the night effect - the difference between stock market returns during the trading day, and when the market is closed. It is a well-documented effect that most of the market gains come overnight returns, and that day returns are relatively flat. The difference in returns is correlated to some fundamental factors, e.g. beta effect, and I am sure other similar effects can be found. This article ( or SSRN ) provides the most comprehensive research on topic that I have read.

Nightshares webpage shows their own research on the topic, as well a brief review of academic research here. Of course the biggest question is execution costs - the trading strategy will be implemented using a combination of liquid futures. Two funds are available - SPY and IWM equivalents, with tickers NSPY and NIWM - very convenient. 

The most interesting writing about the phenomenon I have seen from Bruce Knuteson; the collection of his articles is available here, and a supplemental website on overnight returns here. Mr Knuteson in detail documents the overnight returns in multiple markets over many decades, and writes that it is a type of market manipulation by one or more large financial institutions.

Practically, I am not planning on investing, but I am very interested in keeping an eye on these ETFs. 

Many of you are from the United States, enjoying a long weekend and celebrating an Independence Day. And at the same time, on the other side of the globe, Ukrainians are fighting and dying for their independence, for their right not to live under Russian dictatorship, for the right of self-rule and self-determination. 

After the fall of Soviet Union, a number of nuclear arms and long-range rockets were present in Ukraine. In the mid-90s Ukraine agreed to give up these weapons in return for security assurances from Russia, United Kingdom, and USA, in a treaty called Budapest Memorandum. When Russia started the war in 2014 by attacking Crimea, US and UK did recognize this as violation of the memorandum, but did almost nothing. The sanctions impost on Russia were minor, and both Obama and Trump administrations did not allow Ukraine to purchase the weapon systems necessary to defend ourselves. This impunity emboldened Russia to attack Donbas and Luhansk, and fully attack Ukraine earlier this year. 

If you have a telephone, and have free 5 minutes, please reach out to your senators ☎️ and representatives ☎️ and leave a message asking to provide weapons to Ukraine. Russians have set up concentration camps for Ukrainians, in the occupied territories people are raped, tortured, killed, and kidnapped. It is a long weekend; please take 5 minutes and make a call to support Ukraine.

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