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The Night Effect

Historical data from the last 20 years have revealed an intriguing insight to Owlfred: if he had used 100 dollars to buy stocks at the market open and sell at the market close each day, his original investment would have grown to 120 dollars after 20 years.

Conversely, if he had instead used the same 100 dollars to invest only in the night session, buying stocks at the market close and selling at the following open, his investment would have grown to an impressive 730 dollars over the same period.

Source: BNP Paribas, Salt Financial, from 31st December 2002 to 29th December 2023. Investment represented by time-weighted average price of Nasdaq-100 Index® futures contracts and excluding any transaction costs. For illustrative purposes only.

Recognizing the significance of this finding, Owlfred made a plan to seize upon this night effect as a promising avenue in pursuit of long-term profits. His confidence grew as he dove into academic literature* examining how market returns fluctuate around the clock.

RESEARCH BACKED

What caught Owlfred’s attention was the consistent finding that the stock market’s night session tends to contribute most of the returns, while the day session adds a lot of risk, or “volatility”, for very little return. He realized that only 20% of his portfolio’s gains had come from the day session, while the night session actually accounted for 80%!

Together BNP Paribas, Salt Financial and Nasdaq refined Owlfred’s overnight concept and launched the Nasdaq Night Owl Index.

*Bondarenko, Oleg, and Dmitriy Muravyev. “Market Return Around the Clock: A Puzzle.” Journal of Financial and Quantitative Analysis 58, no. 3 (2023): 939–67. Turc, Julien and Gava Jérôme and McNeal, Roxton. “The Early Bird Catches the Intraday Trend.” The Journal of Investing 31, no. 1 (2021): 47-75

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The Nasdaq Night Owl Index(the “Index”) is the exclusive property of BNP Paribas or one of its affiliates (BNP Paribas and its affiliates are hereinafter called “BNPP”) and is determined, composed and calculated by BNPP. “BNP”, “BNPP”, “BNP Paribas” and “Nasdaq Night Owl Index”(collectively, the “BNPP Marks”) are trademarks or service marks of BNPP.

The Nasdaq Night Owl Index methodology embeds certain costs which cover among other things, rebalancing and replication costs. Such costs (if any) may vary over time with market conditions.

BNP Paribas may license the Nasdaq Night Owl Index to one or more companies (each, a “Company”) for use in a product offered or issued by the Company. The products are not, in whole or in part, sponsored, structured, priced, endorsed, offered, sold, issued or promoted by BNP Paribas or any of its affiliates, or any third party licensor of information to BNP Paribas. BNP Paribas reserves the right to amend or adjust the Nasdaq Night Owl Index methodology from time to time and accepts no liability for any such amendment or adjustment. BNP Paribas is not under any obligation to continue the calculation, publication or dissemination of the Nasdaq Night Owl Index and accepts no liability for any suspension or interruption in the calculation thereof. Neither BNP Paribas nor any of its affiliates accepts any liability in connection with the publication or use of the level of the Nasdaq Night Owl Index at any given time.

BNP Paribas may enter into derivative transactions or issue financial instruments (the “Index Products”) linked to the Nasdaq Night Owl Index. The Nasdaq Night Owl Index Products are not in any way sponsored, endorsed, sold or promoted by the sponsor of any index component (or part thereof) which may comprise the Nasdaq Night Owl Index (the “Underlying Index”) that is not affiliates with BNP Paribas (each such sponsor, an “Underlying Index Sponsor”). The Underlying Index Sponsors make no representation whatsoever, whether express or implied, either as to the results to be obtained from the use of the relevant Underlying Index and/or the levels at which the relevant Underlying Index stands at any particular time on any particular date or otherwise. No Underlying Index Sponsor shall be liable (whether in negligence or otherwise) to any person for any error in the relevant Underlying Index and the relevant Underlying Index Sponsor is under no obligation to advise any person of any error therein. None of the Underlying Index Sponsors makes any representation whatsoever, whether express or implied, as to the advisability of purchasing or investing in, or assuming any risk in connection with, the Nasdaq Night Owl Index Products. BNP Paribas shall have no liability to any party for any act or failure to act by any Underlying Index Sponsor in connection with the calculation, adjustment or maintenance of the relevant Underlying Index and have no affiliation with or control over any Underlying Index or the relevant Underlying Index Sponsor or the computation, composition or dissemination of any Underlying Index. Although BNP Paribas will obtain information concerning each Underlying Index from publicly available sources that it believes reliable, it will not independently verify this information. Accordingly, no representation, warranty or undertaking (express or implied) is made and no responsibility is accepted by BNP Paribas as to the accuracy, completeness and timeliness of information concerning any Underlying Index. BNP Paribas may act in a number of different capacities in relation to the Nasdaq Night Owl Index and/or products linked to the Nasdaq Night Owl Index, which may include, but not be limited to, acting as hedging counterparty, index sponsor and/or index calculation agent.

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