Here's a fact that surprises most traders: for many strategies, almost all the profit happens while you're asleep — overnight, between the close and the next open — and the daytime session actually gives some of it back. A rigorous study called "A Tug of War" measured exactly this.
Who found it, and where
The paper is by Dong Lou (LSE), Christopher Polk (LSE), and Spyros Skouras, published in the Journal of Financial Economics in 2019. The London School of Economics is one of the top finance research institutions in the world.
What they actually did
They split every day's return into two pieces: the overnight part (yesterday's close to today's open) and the intraday part (today's open to today's close). Then they ran 14 well-known trading strategies through that split. In case after case, a strategy's entire profit came from one of the two windows — often overnight — while the other window did the opposite.
Why it should work
Different traders are active at different times. Big institutions trade during the day and often lean against momentum; individuals and news-driven flows dominate around the open. So the same signal can pay overnight (when one crowd sets prices) and reverse intraday (when another takes over). It's a story about who is trading when.
Does it still hold — honestly?
This is stock research, and the mechanics of futures (which trade nearly around the clock) are different — so the "overnight vs intraday" line isn't identical for a futures trader. But the deeper lesson is universal and directly useful: when your edge happens matters as much as whether it happens. A strategy that's great overnight and bad intraday will look mediocre if you never separate the two.
Build it in TapeScript
Turn the finding into a test: "Take my strategy and measure its results separately for the overnight hold versus the regular-trading-hours session — then only trade the window where the edge actually lives." TapeScript's session analysis does exactly this: it breaks any strategy down by session and hour, shows you the profitable windows and the ones quietly bleeding money, and can gate the strategy to only trade when its edge is real. The paper is the "why"; the session scorecard is the "where."
Citation: Lou, D., Polk, C., & Skouras, S. (2019). "A Tug of War: Overnight Versus Intraday Expected Returns." Journal of Financial Economics, 134(1), 192–213. Free PDF from LSE.