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The changing in price of shares are down to the number of people buying or selling stock. So, if there is a large demand for a stock then the share price will increase, and if there are lots of people selling stock, the share price will decrease.

How then, can the price at the open of one market day be different to the price at the close of the previous market day?

Surely if trading is closed between 16:30 and 08:00 then people can neither buy nor sell shares, and hence the share price cannot change. So how then does a share price change overnight?

Is it a case of such a large volume of buys/sells as soon as the market opens, that the time taken for a change in price is negligible, so the open price would appear to be different from the previous close?

Take for example a share price I was just looking at: Barrick Gold closed at 7.07 on 23 July and opened at 6.96 on 24 July.

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The opening and closing prices are set during an auction. If there are overnight news, then the opening auction will reflect information which wasn't there during the closing auction.

And even without the auctions, the last traded price yesterday results from different orders than the first traded price today.

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There is trading happening overnight. A nice paper is Dong Lou et. al: http://personal.lse.ac.uk/loud/OvernightMom.pdf

They explain the overnight trading and actually document that most known anomalies occur on that period.

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  • $\begingroup$ To add to this a price doesn't have to trade for the price to change. For example if you have some asset with a bid of 99 and an offer of a 100 we could give it a naive fair price of 99.5. If later no one wanted to buy at 99 and the market became: bid 98 and offer 100 we could give it a naive fair price of 99. Traded prices aren't always the best estimate of price especially when we begin to venture into less liquid assets. $\endgroup$
    – meh
    Jul 27, 2015 at 14:13
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Major news can come out during the night. Imagine a company declaring bankruptcy or getting wiped off the map because of a natural disaster.

Take a look at the weekly opening gaps in futures and currency pairs.

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