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Raymond YUEN
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YUEN is a finance professional with over 20 years practical experience in financial accounting, financial management and investment. He is a freelance trainer and grader. He also holds a PhD(Management) with research interest in market crash and Fractal Theory. He served Qualification Program of... More
  • Overnight Anomaly 0 comments
    Dec 1, 2013 8:18 AM

    Overnight Anomaly

    Abstract

    There are a lot of day traders in the market which decide their trading strategy when the market open. However, as we all know, to be successful, we have to be different from the market. The following is a short research into the performance of day trading versus overnight trading strategy.

    Body of Article

    There are nowadays a lot of day traders in the market. The research tried to find whether the day traders are rational and shall deliver similar return when they buy at the opening of the market and sell at the closing of the market versus they buy at previous closing of the market and sell at the opening of the market.

    The following research could be regarded as another anomaly that has to tackle.

    The research was based on Hang Seng Index from 1989/10/11 to 2013/11/22 excluding transaction cost. The following is the tabulated results:

     

    Buy at Opening and Sell at Closing

    Buy at Previous Closing and Sell at Opening

    Cumulative Return for the period

    0.66 %

    738.35%

    CAGR p.a.

    0.018% p.a.

    6.22% p.a.

    Standard Deviation p.a.

    19.7%

    15.0%

    CAGR / SD

    0.00096

    0.414

    Conclusion

    It seems that the market participants might not be very rational.

    Appendix

    Chart of the Returns of Two Strategies

    (click to enlarge)

    Themes: anomaly
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