Bull by Night, Bear by Day Is Best Strategy, Goldman Sachs Says

Discussion in 'Trading' started by ASusilovic, Mar 21, 2009.

  1. March 12 (Bloomberg) -- Investors should take advantage of others’ “fear” of the night, according to a study by Goldman Sachs Group Inc. that shows holding U.S. stocks overnight since 1993 would have quadrupled an investment.

    Buying futures on the Standard & Poor’s 500 Index, or a fund that replicates the benchmark for U.S. equities, just as the trading session ends and selling them when the market opens the next day has yielded 309 percent since 1993, New York-based analyst Peter Berezin wrote in a report sent to clients today. The inverse strategy lost 58 percent.

    Investors and traders may have become more reluctant to hold securities overnight, when they’re unable to react to market declines abroad, Berezin wrote. The S&P 500 has plummeted 54 percent since reaching a record in October 2007 as the crisis in credit markets and the collapse of banks including Lehman Brothers Holdings Inc. hammered equities, while the Chicago Board Options Exchange Volatility Index, the so-called gauge of fear, has more than doubled.

    “A large number of market participants are averse to holding overnight positions, which causes them to sell at the close (thereby depressing intraday returns) and buy at the open (thereby inflating overnight returns),” Berezin wrote. “Such aversion to overnight risk is likely to be higher during bear markets.”


    :D :) :p
  2. wavel


    The guy is a genius, what is he waiting for. :D
  3. 93, not 97.
    The way I "feel" it's curve fitting in sample BS. During the tech bubble most of the upside was on up gaps and during the last credit crunch bear market the moves happended intraday. Making it a "winner" system. Totally BS that you can't repeat. It's salesman gimick to tell wathever they want to tell their clients.
  4. Only data I had went to '97. I pulled my post because my data includes the night session. It might work, but if you add in realistic commission and slippage?
  5. I dont know if it can work and I dont really care. My point is it's not because it happened that it's goign to happen again. I would like to see the equity curve/drawdown... of that thing and I'm sure it's not consistent. There surely is a 2-3 years drawadown that no one would keep trading.
  6. gkishot


    How big is the slippage?
  7. <..........................:eek:.............................>
  8. gkishot


    If I buy a highly traded stock at open and sell it at close or vice versa why the slippage should be big? Maybe just few pennies.
  9. That's the first mention of "highly traded stock".

    Regardless, the most obvious method of exploiting stops has been rendered obsolete by market on close basket programs.

    However, there still remain several strategies to capitalize on market / limit orders. They exploit the exiting of professionals @close and amateurs stalking the open.

    "Pennies matter greatly when one employ's "gimmick trades".

  10. Peter Berezin’s Experience

    Senior Global Economist
    Goldman Sachs

    (Public Company; GS; Investment Banking industry)

    2007 — Present (2 years)

    International Monetary Fund

    (Government Agency; 1001-5000 employees; International Trade and Development industry)

    2000 — 2007 (7 years)

    Funny, how a "senior global economist" ends up backtesting S&P futures....:D :D :D
    #10     Mar 21, 2009