Dangers of Relying on OHLC Prices — the Case of Overnight Drift in GDX ETF

Can we truly rely on the opening price in OHLC data for backtesting? While the overnight drift effect is well-documented in a lot of asset classes, we investigated its presence in gold using the GLD ETF and then extended our analysis to the GDX — Gold Miners ETF, where we observed an unusually strong overnight return exceeding 30% annualized. However, when we tested execution at 9:31 AM using 1-minute data, the anomaly diminished significantly, suggesting that the extreme return was partially a data artifact. This finding highlights the risks of blindly trusting OHLC open prices and underscores the need for higher-frequency data to validate execution assumptions.

https://quantpedia.com/dangers-of-relying-on-ohlc-prices-the-case-of-overnight-drift-in-gdx-etf/