Market efficiency implies that the risk-adjusted returns from holding stocks during regular trading hours should be indistinguishable from the risk-adjusted returns from holding stocks outside those hours. We find evidence to the contrary. We use broad-based index exchange-traded funds
for our analysis and the Sharpe ratio to compare returns. The magnitude of this effect is startling. For example, the geometric average close-to-open (CO) risk premium (return minus the risk-free rate) of the QQQQ from 1999–2006 was +23.7 per cent whereas the average open-to-close
risk premium was −23.3 per cent with lower volatility for the CO risk premium. This result has broad implications for when investors should buy and sell broadly diversified portfolios.