Nightshares
ETFs Designed to Capture
the Night Effect
The Night Effect
NightShares was created so that investors can capture the “Night Effect”, a historical source of differentiated returns and volatility within equities. The Night Effect is captured by separating out the risk and return differences between trading when markets are open (the “day”) and when they are closed (the “night”). An extensive body of research over many years has shown that investors frequently benefit from avoiding the volatile day sessions and investing in the period between market close and market open.
NightShares allows investors to capture the Night Effect in US large cap and small cap equity. As the US equity market represents the single largest equity market in the world, NightShares provides investors the ability to harness the Night Effect across a wide range of portfolios and trading strategies.

Annualized returns are calculated as the average daily returns over the full period, multiplied by 252. Annualized volatility is calculated as the standard deviation of the daily returns over the full period, multiplied by the square root of 252.
Source: AlphaTrAI Research (1/1/2003-12/31/2022)
NightShares Research
Capital markets are global, operating 24 hours a day as investors continually react to information, manage risk and look to generate returns. Find out the value of distinguishing between the day and night trading sessions.
This 3-page summary provides insights into the risk and return differences between the day, night and full 24 hour trading sessions in both large and small cap US equity over a ten year period
This 4-page paper provides insights into the Capital Asset Pricing Model (CAPM), a cornerstone of equity investing, and shows how the model breaks down by day but works at night
This 7-page paper provides insights into the Night Effect over the last 10 years in both "up" and "down" markets as well as in the tails of the "hold" return distribution
This 5 page paper summarizes the performance of the Night Effect in 2022, a year in which the Night Effect performed well with the overnight session down less than the full 24 hour (“hold”) cycle and with substantially less volatility.
NightWatch
Comparing the Night and Day Since Yesterday's Close
Exposure | Return (%) | ||
---|---|---|---|
Prior Night
![]() From prior night close to current day opening
|
Current Day | Since Previous Close |
Academic Research
After identifying the Night Effect through our own independent research, the NightShares team discovered that this effect had already been studied by academics around the world. These academics, leveraging comprehensive databases, powerful analytical techniques and cross border collaborations, are able to provide investors with valuable insights into the Night Effect.
This paper was published in September 2008 by professors at Virginia Tech, The University of Utah and Purdue University. The study examined returns for individual stocks, equity indexes and futures on equity indexes across US exchanges. The authors find “a surprising new pattern in returns; night returns, measured from close to open, are greater than day returns, measured from open to close. This pattern in returns produces the unexpected finding that the US equity premium (as measured by the S&P 500) over the last decade is solely due to overnight returns."
This paper was first published in February 2020 and updated in September 2021 by an economist at the Federal Reserve Bank of New York along with two professors at the Copenhagen Business School. The study examined trade data for S&P 500 futures contracts from 1998 - 2020. The opening line of the paper reads “This paper documents large positive returns to holding U.S. equity futures overnight during the opening hours of European markets”. It goes on to state that “despite the 24 hour nature of the market, returns do not accrue linearly over the 24 hours."
This paper was first published in March 2020 and updated in June 2021 by professors at the University of Illinois, Chicago and Michigan State University. The study examined the returns of S&P 500 e-mini futures from 2004 to 2018. The authors write in the introduction to the paper: “When are market returns positive? We study how the excess market return reflected by the S&P 500 index changes over day and night. E-mini S&P 500 futures are actively traded at night, and their returns equal the excess returns on the S&P 500 index."
Click here to access the paperThis paper was published in June 2020 by professors at the Haas School of Business (University of California, Berkeley) and State University of New York at Buffalo. The study examines the returns of all U.S. publicly listed common stocks from 1992-2016. The authors write in the paper's abstract that "stock returns are positively related to beta overnight, whereas returns are negatively related to beta during the trading day".
Click here to access the paperOur Team
A team of experienced financial services entrepreneurs have come together to launch NightShares. Based on a shared vision of taking compelling capital markets insights and converting that knowledge into investable products, the team brings decades of experience into the creation, management and distribution of Exchange Traded Funds (ETFs) to NightShares.
FAQs
The “Night Effect” reflects the differentiated source of returns and volatility (risk) within equities by avoiding exposure when markets are open (“the day”) and simply having exposure when they are closed (the “night”).
There is no single unified reason as to why the Night Effect exists and the Night Effect is not constant, i.e. there are times when day markets outperform the night session and vice versa. Academic research has proposed multiple reasons as to why the Night Effect exists and scholars have not aligned behind one single reason for its existence. The frequently stated rationale for the Night Effect’s existence focuses on the timing of information flow/availability, risk management practices and liquidity premiums arising from differences in the trading volumes between the day and night sessions. We believe that these reasons make intuitive sense and align with how investors make trading decisions.
We use opening and closing prices on market weighted, index based Exchange Traded Funds (ETFs) to distinguish between the day and night return and risk characteristics of various equity exposures. ETFs are used, as opposed to indexes, because they provide a daily source of both opening and closing values.