Peter Ciampi
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​​I'm a Private investor focused on closed-end fund events and statistical arbitrage of ETFs

17. The Stock Market loves the Night; But Also the Day in the last 10 years

2/18/2018

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On Sunday Feb 4th the New York Times discussed a report that found : "Buying SPY at Close and Selling at Open" returned 571% versus a daytime return of -5%:
https://www.nytimes.com/2018/02/02/your-money/stock-market-after-hours-trading.html
(Many stories focus on SPY since it's the world's most traded instrument.) This daily trading of SPY paralleled my system but at oppose times - I propose "Buying SPY at Noon and Selling at Close." They reported on losses in SPY during the day  forcing the question: If SPY was dropping during the day, how, how could I select afternoons when it rose?.

The study used 25 years of SPY data But since GDP-based ETFs have only been liquid for 8 years I examined daytime vs  overnight profit for 8 and 10 year sub periods.

To stay consistent with the NY Times article In the table below I use compound  rather than additive returns used in past posts. Recall the grammar school problem of a $100 item whose price is $121 after a two 10%  price increases so compound returns are higher than my previous additive returns.

Note that results in the last ten years (row 3) differ with the prior fifteen (row 2); Daytime returns dramatically shift from negative 39% to positive 53%.row 3.  This solved my question. SPY has not been dropping during afternoons for more than 8 years. (Although the quoted study is correct I've notified the NY Times about this sub period difference.)
 
​
930-4pm
4pm-945 NextDay
 
 
1993-2008
​15 years
-39%
241%
 
 
2009-2018
​9 years
53%
61%
 
 
 
 
 
12-4pm
DailyAvgProfit
2011-2018,  
​ 1765 days
 
 
23%
1765 days.  .01%
2011-2018,  
​ 329 days
 
 
57%
   329 days.  .17%
Comparing afternoons in the last 2 rows shows SPY_PM model's impressive performance. In the last 1765 afternoons SPY retuned 23% or .01%/day. On model afternoons (329 days) it returned 57% or .17/day. In 10 million random selections of 329 days not one selection had a better return. Strong significance is when the system is better than 1 in 100 random trials. These results are better than 1 in 10,000,000
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    May23 Return .31%


    Out-of-Sample return 62%








    Updated at 12 and 4:15pm on trade days

    Author

    Peter Ciampi is the Managing Director of CEF Events LTD, a British Virgin Islands business company and the Managing Partner of Time-Zone Arbitrage,a Delaware LP. Both companies invest in special situations of closed-end funds and statistical arbitrage of international ETFs.

@ 2017 Peter Ciampi
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