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Trading at all hours: The portfolio implications

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These are articles written by professionals for investment professionals. They are contributions from external subject matter experts who do not work for CFA Institute, but may be a CFA charterholder as well as a member of a CFA Society. All are experts in their field and strive to deliver useful insights that help investment professionals make better decisions.

Millions of retail investors opened up brokerage accounts this past year and many took to trading throughout the day as a way to pass the time, keep themselves entertained, and make a bit of money.

So did all this trading actually help the average retail investor’s portfolio during the COVID-19–dominated months of 2020?

Nighttime is the right time

To find out, we looked at the 100-most popular stocks traded by retail investors over the past year as compiled by Robinhood. 

We examined how an investor would perform if they bought each stock as trading opened each day and sold it hours later as the market closed. This we termed the daytime return. We then compared that to the nighttime return, or what an investor would generate if they bought the stock at the close, held it overnight, and then sold it as the market opened.

As it turns out, investors who traded these 100 stocks throughout the day actually lost an average of 0.183% in returns per daytime. If we assume 21 trading days in a month, that equates to losses of 3.84% per month in daytime returns.

But if investors took the risk of holding these same stocks overnight, they averaged 0.195% in returns each night, or 4.10% per month in nighttime returns. And if the investor held the stock over the weekend, they earned an average of 0.271% per weekend, or 1.08% per month in returns, assuming four weekends each month.

Average Returns: 100 Most-Traded Stocks

Daytime returnNighttime returnWeekend return
14 February –
31 December 2020

What immediately stands out when we compare the current COVID-19 era to the 10 years preceding it is that daytime returns were much lower during the pandemic. From 2010 to 2019, the average daytime return of the 100-most popular stocks was 0.004% per day compared to -0.183% amid COVID-19.

Nighttime returns also showed a distinctive trend. From 2010 to 2019, they averaged 0.042% per night. During the pandemic, they spiked to 0.195% per night between 14 February and 31 December 2020.

In fact, since February, when so many new investors joined the day trading game, 95% percent of these top-traded stocks had greater nighttime than daytime returns.

The day-night-weekend performance of Tesla stocks illustrates these larger patterns. Investors who bought Tesla at the opening of each market day and then sold it at the close averaged a loss of 0.12% per day. If they held the stock overnight, however, they gained an average of 0.83% per night. And if they held it over the weekend, they averaged 1.49% per weekend in returns!

If bubbles did exist, they would pose a serious challenge to neoclassical finance. Bubbles would contradict the ideas that markets are rational or work in an informationally efficient manner. The reader will discover that the author is skeptical that bubbles actually exist.

Why is that?

There are two potential explanations for these results: either retail investors prefer to short stocks during the day and thus exert downward pressure during regular trading hours, or there is a lack of liquidity on nights and weekends, so investors can earn a premium for holding their shares during these hours.

Whatever the explanation, one thing is clear: all the day trading by the new Robinhood class of retail investors has not been profitable for long-only investors.

The question is whether this trend will continue through 2021?

CFA Institute has transformed its annual conference for 2021, with a binge-worthy digital format and an exciting slate of speakers. Join us for the Alpha Summit on 18 May 2021.


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By Derek Horstmeyer, an associate professor at George Mason University School of Business, specializing in exchange-traded fund (ETF) and mutual fund performance.

 Ano Glonti, a financial analyst intern at Transparency®. She earned a master’s degree from Fordham University, where she was a vice president of operations of the Private Equity and Venture Capital Club.

Shaista Khodabux, a recent graduate from George Mason University- School of Business with a dual-degree in finance and information systems operations management.

Image credit: ©Getty Images / ijeab