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SALT LAKE CITY -- Researchers at the University of Utah and Virginia Tech recently looked at 13 years of stock market trades, and they noticed some patterns.
You might think stock prices go up the most during the trading session, but that's not always the case.
The Research
"What we found, really, is that most of the positive, upward movement in the market in the last 15 years or so came from when the market closed," said Michael Cooper, a finance professor at the University of Utah.
Cooper, who co-authored the study, says that's partly due to corporations releasing information about their company after the closing bell instead of during the trading day. This could insulate a stock from a severe plunge that could happen if bad financial news is delivered while the markets are open.
Cooper says this tactic has become popular within the last 15 years or so.
When should I trade?
Since stock prices rise due to the after-hours activity from publicly traded companies, Cooper says you can plan the most effective time for trading.
"In theory, if you can trade right at the closing price and then sell right at the opening price the next morning, you could capture that return," he said.
But, if you wait too long after the opening bell, you could miss out on selling at a high price.
"In the first hour the markets open the next day, on average, the prices go down a little bit," Cooper said.
If you don't sell a stock at the very beginning of the day, Cooper says you should hold off on doing so.
E-mail: pnelson@ksl.com
