Suspicious Returns in Your Investments
More than all the positive returns to the world's major stock market indices over the past three decades occurred overnight.
These extraordinary plots are suspicious. No variation of "returns are due to the bearing of risk" can explain the significantly negative intraday returns in these plots. The uncoordinated actions of millions of individual traders should not produce such strikingly consistent return patterns.
You can easily reproduce these plots yourself. Details are provided in Refs. [2023, data] below.
Frequently Asked Questions
Do these plots have a plausible innocuous explanation?
No. All innocuous explanations so far proposed have serious problems [2020, 2021].
Is the explanation in  a conspiracy theory?
No. According to Wikipedia: "A conspiracy theory is an explanation for an event or situation that invokes a conspiracy by sinister and powerful groups, often political in motivation, when other explanations are more probable."
The literature currently contains no plausible alternative explanations for these plots. The explanation in  is not political in motivation. "Nerdy and scared" describes most of the quant perps in  more accurately than "sinister and powerful."
The explanation in  involves at most a few firms. If more than one firm is involved, the explanation in  requires no explicit conspiracy among those firms. The explanation in  does not require more than one firm.
The explanation in  is easy for regulators to check.
Why then does the Financial Times refer to the explanation in  as "conspiratorial"?
The FT understands the phrase "conspiracy theory" is not appropriate here, but the FT wants to use the phrase anyway, so the FT uses "conspiratorial theory."
On the list of misleading mistakes in the FT's description of this issue, this choice of phrasing doesn't even make the top ten. Eight of the FT's more important, objective, factual, material, misleading mistakes are noted in a brief rejoinder. The FT has chosen to leave each of these eight objective, factual, easily checkable errors on the record without correction.
Is the explanation in  crazy?
No. These plots are crazy, but there they are. You can reproduce them yourself [data]. The story in  is a straightforward, sane explanation for these crazy plots.
Is the explanation in  complicated?
Not really. This explanation is provided in varying levels of detail in [2016, 2018, 2019]. The main text of these articles are only 1, 2, and 3 pages, respectively.
What does all this mean for me?
If you are an investor and there is something suspicious in one of your investments that you don't understand, you should probably get out.
If you are a regulator responsible for the integrity of a market in which there are strikingly suspicious return patterns, you should promptly and clearly alert your public to them and then figure out whose trading caused them. Failing to do this puts you at risk of severe public embarrassment. Hindsight is 20/20, and people armed with it will not be sympathetic.
If you are a finance/economics/business journalist/blogger/pundit, you should alert your readers to these suspicious plots as a potential problem. Failing to do this puts you at risk of severe professional embarrassment. You were either ignorant of these plots, failed to recognize them as a problem, or chose to not tell your readers about the problem. None of these three scenarios (ignorant, stupid, or corrupt, respectively) is good for you.
If you are a money manager on record as being aware of this issue, you should alert your investors to this matter as a potential problem and reallocate their funds appropriately. Failing to do this gives your investors grounds for suing you.
If you are on record as being in some way involved in the trading described in , you should raise this issue as a matter of concern to your manager (on the record, multiple times) or an appropriate regulator. Failing to do this exposes you to criminal prosecution.
 Nothing to See Here: How to Say It When You Need to (SSRN)