Overnight Return

AAA

DEFINITION of 'Overnight Return'

One of the two components of the total daily return generated by a stock. Overnight return measures the return generated by a stock when the market is closed, based on its price change from the close of one trading day to the opening of the next trading day. Overnight return and intraday return together constitute the total daily return from a stock, which is based on the price change of a stock from the close of one trading day to the close of the next trading day.

INVESTOPEDIA EXPLAINS 'Overnight Return'

The overnight return component of total return is significant because most companies report their financial results when markets are closed, in order to enable all investors to receive the information at the same time. Most companies also make major announcements after market hours, rather than in the middle of the trading day. As a result, the opening price of a stock is often likely to be materially different from its previous day's close.


In addition, as global financial markets display a higher degree of correlation thanks to globalization and the efficient dissemination of information, stocks are now increasingly likely to be affected by developments in overseas markets, which would also boost the importance of overnight returns.

RELATED TERMS
  1. Expected Return

    The amount one would anticipate receiving on an investment that ...
  2. Intraday

    Another way of saying "within the day". Intraday price movements ...
  3. Actual Return

    The actual gain or loss of an investor. This can be expressed ...
  4. Return

    The gain or loss of a security in a particular period. The return ...
  5. Correlation

    In the world of finance, a statistical measure of how two securities ...
  6. Total Return

    When measuring performance, the actual rate of return of an investment ...
RELATED FAQS
  1. Why would a company issue a rights offering?

    Companies most commonly issue a rights offering to raise additional capital. A company may need extra capital to meet its ... Read Full Answer >>
  2. What are the benefits of using ceteris paribus assumptions in economics?

    Most, though not all, economists rely on ceteris paribus conditions to build and test economic models. The reason they do ... Read Full Answer >>
  3. What is the difference between the rule of 70 and the rule of 72?

    The rule of 70 and the rule of 72 give rough estimates of the number of years it would take for a certain variable to double. ... Read Full Answer >>
  4. When does a primary market become a secondary market?

    The difference between the primary and secondary markets is a simple matter of issue versus resale. While both marketplaces ... Read Full Answer >>
  5. What is the risk return tradeoff for bonds?

    Macaulay duration and modified duration are mainly used to calculate the durations of bonds. The Macaulay duration calculates ... Read Full Answer >>
  6. What is the formula for calculating the capital to risk weight assets ratio for a ...

    Use the Macaulay duration to calculate the duration of a zero-coupon bond. The resulting Macaulay duration of a zero-coupon ... Read Full Answer >>
Related Articles
  1. Active Trading Fundamentals

    Charting Your Way To Better Returns

    Learn about the powerful hybrid techniques that take advantage of both technical and fundamental analysis.
  2. Bonds & Fixed Income

    Find The Highest Returns With The Sharpe Ratio

    Learn how to follow the efficient frontier to increase your chances of successful investing.
  3. Bonds & Fixed Income

    Boost Bond Returns With Laddering

    If you want a diversified portfolio and steady cash flow, check out this fixed-income strategy.
  4. Mutual Funds & ETFs

    Published Mutual Fund Returns Not Always What They Appear

    Survivorship bias erases substandard performers, distorting overall mutual fund returns.
  5. Active Trading

    Market Cycles: The Key To Maximum Returns

    You need to understand the various phases of the market cycle to avoid bubbles and make the best investments.
  6. Economics

    How to Do a Cost-Benefit Analysis

    The benefits of a given situation or business-related action are summed and then the costs associated with taking that action are subtracted.
  7. Stock Analysis

    Is 21st Century Fox a Sly Bet?

    An in depth look at the revenue streams of international media conglomerate Twenty-First Century Fox.
  8. Technical Indicators

    Will These High-Flying Stocks Stay Hot in 2015?

    These 10 stocks were on fire in 2014. Will they stay hot?
  9. Stock Analysis

    Google Stock: A Tale of Two Share Classes

    Google stock comes in two different flavors with different rights for shareholders.
  10. Investing

    Which Dow Jones Stocks are Safe? Which are Risky?

    In a situation where our sustained bull run could turn into a sell-off rather quickly, here are four somewhat safe Dow stocks and four to be wary of.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center