The value of overnight trading

One of the more interesting anomalies is what we can call the overnight effect - the fact that most of the returns generated for the many stocks and indices occur between the close and open and not during normal trading hours between the open and close. This may seem obvious to many given that much of the important news about stocks is generated after the close and before the open. For example, most earnings announcements are made when the market is closed. Chart is from Elm Street. 

However, some have argued that this is a result of price manipulation, see Bruce Knuteson, who suggests that price pressure overnight leads to then declines during the day. This manipulation focuses on pushing prices higher during less liquid times and then offsetting the gains during the day. This is an interesting and compelling story and is consistent with the data; however, it is not clear who and how big is this activity. 

Surprisingly there has not been much research explaining this anomaly other than to document its existence.