U.S. Equity Futures Lose 3.7% Overnight Drift as Closing Order Imbalances Halve
Updated
Updated · Liberty Street Economics - · Jul 1
U.S. Equity Futures Lose 3.7% Overnight Drift as Closing Order Imbalances Halve
1 articles · Updated · Liberty Street Economics - · Jul 1
Summary
The 2:00-3:00 a.m. ET return window in U.S. equity futures, which once delivered about 3.7% annualized, averaged near zero from 2021 through 2025.
New York Fed researchers tie the fade mainly to compressed end-of-day order imbalances: the standard deviation of last-hour relative signed volume fell to 2.9% from 6.5%, making extreme close imbalances much rarer.
Other drivers in their inventory-risk framework barely changed, with the VIX easing only to 19.4 from 20.4 and overnight E-mini volume edging up to 16% from 15%.
The weaker pattern also showed up across E-mini Nasdaq-100 and Dow futures, while NightShares' two overnight-return ETFs launched in 2022 shut within 14 months.
Researchers say smaller closing limit orders from algorithmic liquidity providers may be transmitting less residual inventory; if imbalance dispersion widens again, the overnight drift could reappear.