But also, do not backtest with open and close prices since you cannot reliably transact at these levels.
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The first one seems plausible (and testable — look at direction of trade flow in overnight sessions). The second one would not persistently move the price in one direction, would it?
I would still point to open/close distortions as the most likely factor. The close to close return on S&P 500 futures is more volatile than literally any other 24 hour return you could choose (by a *lot* - 17% vs 15.5% in the sample I looked at) which indicates big distortions.
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Study below. I said SPX but this was using ES futures mid prices.https://twitter.com/macrocephalopod/status/1358222923329323008 …
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