Frequently Asked Questions
Some market signal changes can occur before or after market trading hours. With the onset of the digital age, many markets remain somewhat active, especially since the world is interconnected now more than ever before. Thus what happens over in China can have a material effect on US markets. Therefore, markets are more susceptible to gap risk. That said, since many of these overnight news events can be good or bad, investors who must wait until the next day to get into their chosen ETF sometimes have an advantage or disadvantage, but the pluses and minuses often get washed out over time, with perhaps a slightly bias toward the negative since strength can beget strength and weakness can beget weakness.
Of course, if we are discussing individual stocks, there is serious gap down risk where stocks can lose half their value or more overnight, thus when dealing with individual stocks, position sizing rules should be implemented.