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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.

Quadrant chart Q2 2022 (1)

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 (7/1/2012-6/30/2022)

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.

Overview of the Night Effect

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

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The Night Effect in Full Swing: H1 2022

This 4 -page paper provides insights into the risk and return differences between the day and night trading sessions during the January - June market downturn

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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.

Return Differences between Trading and Non-Trading Hours: Like Night and Day

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."

Click here to access the paper

The Overnight Drift

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."

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Market Return Around the Clock: A Puzzle

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 paper

Our 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.

  • Leadership
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Bruce Lavine Chief Executive Officer Bruce is NightShares’ Founder and Chief Executive Officer, bringing his passion for building new businesses, launching ETFs and developing impactful teams to NightShares. View LinkedIn Profile
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Max Gokhman, CFA Chief Investment Officer Max is Chief Investment Officer, leading the firm’s efforts to efficiently and effectively capture the Night Effect. View LinkedIn Profile
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Tatiana Balekha Head of Operations Tatiana is NightShares' Head of Operations responsible for working with a variety of partners across the investment process, ranging from sub advisors to custodians, to ensure the products deliver seamlessly for investors. View LinkedIn Profile
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Jamie DeNitto Head of Sales Jamie is NightShares' Head of Sales, leading a national team focused on educating investors about the Night Effect and NightShares’ products. View LinkedIn Profile
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Dan Doischen RIA Sales Director Dan is NightShares RIA Sales Director, focusing on financial advisors looking to learn more about how the Night Effect can enhance client portfolios. View LinkedIn Profile
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Steven Greenblatt Institutional Sales Director Steven is NightShares Institutional Sales Director, focusing on family offices and hedge funds looking to harness the value of the Night Effect in their investment strategies. View LinkedIn Profile
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Craig Anderson RIA Sales Director Craig is NightShares RIA Sales Director, focusing on financial advisors looking to learn more about how the Night Effect can enhance client portfolios. View LinkedIn Profile
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Katherine Paulson Marketing Director Katherine is NightShares' Marketing Director, working to launch the NightShares brand and to educate investors about the Night Effect. View LinkedIn Profile
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Andy Arenberg Strategy/Distribution Advisor Andy is a strategic advisor to the NightShares team bringing extensive experience in strategic planning, brand development and ETF marketing. View LinkedIn Profile
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Francis Enderle Capital Markets Advisor Francis is a strategic advisor to the NightShares team bringing extensive experience in portfolio management and trading. View LinkedIn Profile

FAQs

What is the Night Effect?

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”).

Why does the Night Effect exist?

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.

How do you measure the Night Effect?

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.

Does the Night Effect appear in both up and down markets? Our research shows differences in risk and returns across multiple time periods in both up and down markets.  We also find that the night trading session is generally less volatile than the day session and frequently declines less than the full 24 hour trading cycle in down markets.
How do you see investors using NightShares ETFs? We see investors using NightShares ETFs to implement a range of short and long term investing strategies.  Given the differentiated risk/return characteristics of ETFs that focus on just the overnight session in the equity markets, we believe that investors will use NightShares ETFs to revisit their existing asset allocation strategies as well as to implement short term trading strategies based on how markets distinctly react to information during the day and night trading sessions.
Are there other products that focus on the Night Effect? We believe these products are unique in that they are singularly focused on capturing the Night Effect.
Will you be buying and selling all the stocks in the portfolio every day? We will be trading every day but have no plans to buy all the stocks at their respective weights every night and sell them every morning as this would lead to a high level of transaction costs - thereby negating the value of the Night Effect.   Instead, we will use a variety of financial instruments to implement our portfolio strategies, including equity index futures and/or swaps.  Liquid equity index futures allow for broad equity exposure and reduce the cost of gaining exposure compared to trading individual stocks.  Swaps contracts, created with well capitalized investment banks, also allow us to create a range of return streams that align with the portfolios’ objectives.  Combined with institutional trading approaches, such as algorithmic trading, we are looking to use a range of financial instruments to efficiently gain exposure to the overnight portion of the market.
Are these passive or active ETFs? NightShares ETFs are transparent active ETFs