Boyarchenko, Larsen, and Whelan argue in Liberty Street Economics that closing imbalances explain a fading market pattern

Boyarchenko, Larsen, and Whelan argue in Liberty Street Economics that closing imbalances explain a fading market pattern

On July 1, 2026, Nina Boyarchenko, Lars C. Larsen, and Paul Whelan report that the overnight drift they had documented around the European market open has faded in their later sample. They describe the pattern as compensation to liquidity providers, who absorb end-of-day buying or selling pressure and carry risky inventory overnight; prices can rebound when overseas buyers arrive. The authors attribute most of the decline to compressed end-of-day order-imbalance dispersion, while their measures of return variance and overnight liquidity changed little. They also report that limit orders posted at the close have become smaller, consistent with algorithmic liquidity providers slicing flow more finely and transmitting less residual inventory to end-of-day counterparties. Their explanation links the weaker return pattern to a specific change in closing order flow. Their framework predicts that the overnight drift should reappear in the same window if order-imbalance dispersion widens toward its pre-2020 range. Testing that prediction requires a future period of elevated dispersion, which their sample does not contain.

Publication: db073759-bfd5-a0cd-7b1a-f369cbadd260

attribution — pass: This is a single Liberty Street Economics post by Nina Boyarchenko, Lars C. Larsen and Paul Whelan, published by the New York Fed. The reading attributes its findings and prediction to these authors throughout.

Nina Boyarchenko, Lars C. Larsen, and Paul Whelan

summary — uncertain: The reading is faithful, but a non-specialist may not grasp the central development. It never says the overnight drift is a return to holding U.S. equity futures in the 2:00–3:00 a.m. ET window, and it gives no size (about 3.7 percent a year). The central term 'order-imbalance dispersion' (how widely end-of-day net buying or selling swings) is unexplained, as is 'limit orders', and no definitions are supplied. Smallest repair: one plain-language sentence on what the drift is and how big it was, and a short gloss of imbalance dispersion.

a large, persistent return to holding U.S. equity futures in the narrow window between 2:00 and 3:00 a.m. Eastern time, when European equity markets open

date — pass: The originalPublished UTC day, July 1, 2026, matches the post's dateline and citation, stated at day precision. The 2026-07-07 modifiedAt is noted, but editedAfterPublication is not set and the reading relies only on core article text. The reading uses no hindsight framing, presents the forecast as the authors' prediction, and the page is a publisher page, so no archive disclosure is needed.

July 1, 2026 The Disappearing Overnight Drift

support — pass: Each claim tracks the source: the drift near zero since 2021, the bulk of the decline attributed to compressed imbalance dispersion, VIX and overnight volume share little changed, smaller closing limit orders, and the conditional falsifiable prediction with the authors' caveat about testing. No benefits, costs or outcomes are invented.

Our decomposition attributes the bulk of the decline to one input to the pricing equation—the compression in end-of-day imbalance dispersion

media — pass: No media is selected and no verified candidates were supplied, so there is no media identity or relevance issue.