The Disappearing Overnight Drift

Nina Boyarchenko, Lars C. Larsen () and Paul Whelan ()

No 20260701, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: In a 2021 Liberty Street Economics post, we documented the “overnight drift”—a large, persistent return to holding U.S. equity futures in the narrow window between 2:00 and 3:00 a.m. Eastern time, when European equity markets open. Five additional years of data later, that pattern appears to have faded: the 2:00–3:00 window that previously generated roughly 3.7 percent per annum has averaged close to zero since 2021. In this post, we revisit the overnight drift in light of the post-publication sample and use our inventory-risk framework to ask which of three observable channels—the dispersion of closing order imbalances, the level of return variance, or the risk-bearing capacity of liquidity providers—accounts for the change.

Keywords: overnight drift; closing order imbalances (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2026-07-01
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DOI: 10.59576/lse.20260701

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