Sep

25

The Disappearing Overnight Drift, Federal Reserve Bank of New York (Liberty Street Economics, July 1, 2026

Overnight returns used to be quite regular the last 10 years but the edge has faded. Used to be .02% mean, but this year .003%. More changing cycles.

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.


Comments

Name

Email

Website

Speak your mind

Archives

Resources & Links

Search