Market Return Around the Clock: A Puzzle

Oleg Bondarenko and Dmitriy Muravyev

We study how the market return depends on the time of the day using E-mini S&P 500 futures actively traded around the clock. Strikingly, four hours around European open account for the entire average market return. This period’s returns have a 1.6 Sharpe ratio and remain high after transaction costs. Average returns are a noisy zero during the remaining 20 hours. High returns are consistent with European investors processing information accumulated overnight and thus resolving uncertainty. Indeed, uncertainty reflected by VIX futures prices rises overnight and falls around European open. The results are stronger during the 2020 COVID crisis.