High-yield bond ETFs represent a unique financial vehicle: they are highly liquid instruments that hold inherently illiquid securities, creating a fertile ground for predictable market behaviors. Our latest research uncovers an intriguing anomaly within these ETFs, similar to those observed in the stock market: overnight returns are systematically higher than intraday returns. This overnight anomaly in high-yield bonds is not only prevalent but also exhibits a distinct seasonal pattern, primarily from Monday’s close to Tuesday’s open and from Tuesday’s close to Wednesday’s open. Additionally, this anomaly displays a reversal characteristic, where overnight performance is typically more robust following a negative close-to-close performance in the preceding period. These findings reveal potential opportunities for trading strategies that leverage these consistent overnight return patterns, offering new insights into high-yield bond trading dynamics.

In the complex world of financial markets, subtle patterns often reveal themselves through careful observation and analysis. Among these is the intriguing phenomenon we can call the “Lunch Effect,” a pattern observed in U.S. stock indexes where market performance tends to exhibit a distinct positive shift immediately after the lunch break, following a typically negative or flat performance earlier in the trading day right before the lunch. This lunchtime revival is not an isolated occurrence; it shares a curious connection with the “Overnight Effect,” a well-documented tendency for the U.S. stock market to experience the bulk of its appreciation during non-trading hours, with relatively little movement during the trading day itself. Together, these effects underscore the intricate dynamics of market behavior, where timing and investor psychology play crucial roles in shaping intraday and overnight market performance. Understanding these patterns can offer valuable insights into the rhythm of the markets and the underlying factors that drive short-term price movements.

In one of our older posts titled ‘Case Study: Quantpedia’s Composite Seasonal / Calendar Strategy,’ we offer insights into seasonal trading strategies such as the Turn of the Month, FOMC Meeting Effect, and Option-Expiration Week Effect. These strategies, freely available in our database, are not only examined one by one, but are also combined and explored as a cohesive composite strategy. In partnership with Deltaray, using MesoSim — an options strategy simulator known for its unique flexibility and performance — we decided to explore and quantify how our Seasonal Strategy performs when applied to options trading. Our motivation is to investigate whether this strategy can be improved in terms of risk and return. We aim to systematically harvest the VRP (volatility risk premium) timing the entries using calendar strategy to avoid historically negative trading days.

Seasonality effects, one of the most fascinating phenomena in the world of finance, have captured the attention of investors and researchers worldwide. Since these anomalies are often driven by factors other than general market trends, they usually don’t correlate strongly with market movements, which can help reduce the portfolio’s overall risk. Following the theme of our previous article Are There Seasonal Intraday or Overnight Anomalies in Bitcoin?, we decided to extend the data and conduct a more in-depth analysis of our earlier findings. This article explores potential seasonal patterns related to Bitcoin, focusing on whether these patterns are influenced by factors such as current market trends or the level of volatility in the market.

Cryptocurrencies are a high-risk and very speculative asset class that, from being used only by tech geeks worldwide, spread from small retail craziness of early adopters to institutional adoption and mainstream. Some claim it to be a world-changing concept with the utilization of blockchain (databases) and smart contracts that open a wide range of opportunities, from decentralizing finance to self-governing algorithms; some others point to unnecessary scams, money laundering, and bubbles. We have been covering the concepts and topics relating to crypto extensively. This article will continue our investigation of this interesting field. We would like to test how the price action looks around some of the events unique to the cryptocurrency world – namely the Bitcoin reward halvings and hard and soft forks in Bitcoin and Ethereum networks.

Life is not always rosy; many tragedies and unexpected events hurt individuals and society. While some are hardly avoidable, such as natural disasters, some others as wars, are generally only functions of hate and greed. In the case of predictable events, risk measures can be employed, but unexpected outbreaks of aggression can hardly be hedged across the spectrum of different financial assets. We had previously touched on a similar topic and looked at some historical geopolitical shocks and price reactions around that time. Now, we would like to do a short review of an interesting 140-page paper by Dat Mai and Kuntara Pukthuanthong (2022), which, while not providing actionable strategy, provides insightful retrospection and takes war topic modeling to the higher level, covering developing narratives and influence factors extensively.