Trading Versus Non-Trading Returns: Evidence from Russia and the U.K.

Overnight risk is of particular interest for many market participants including traders who provide liquidity to the market, but also to market participants with longer investment horizons who want to determine whether a given risk–return tradeoff can justify possible intermediate portfolio hedging transactions. Overnight risk may in particular play a highly significant role in emerging markets, given that information is incorporated into prices at a slower rate and liquidity may hinder a quick unwinding of portfolio positions.