Diversifying via Time Zones

What happens when you buy a stock from a market that is closed?

June 2024. Reading Time: 10 Minutes. Author: Nicolas Rabener.


  • Funds providing the same exposures trade similarly, regardless of where they trade
  • On paper, investors can achieve benefits by diversifying via time zones
  • In reality, this represents a form of volatility laundering like private equity


On the 24th of January 2023, Hindenburg Research, an activist investor, published a research report on the Adani Group that accused the Indian conglomerate of stock manipulation and accounting fraud. Hindenburg Research entered short positions in U.S.-traded bonds and non-Indian-traded derivatives linked to the Adani Group and its affiliates, hoping to profit from its research report. Although the stock of Adani Enterprises Limited plummeted by more than 50% in the following weeks, it recovered substantially in the remainder of the year. It did not lead to the demise of the Adani Group.

One of the interesting aspects of this event is the difference in time zones as there is no overlap in the trading hours between the U.S. and India stock exchanges. There are ETFs trading in U.S. that own Indian stocks, but how do these react to such news? Do the ETFs decrease in value to reflect the latest news, or trade unchanged until the next day when the news will be reflected in the stock price of Adani Enterprises Limited that is traded in on the National Stock Exchange of India in Mumbai?

The impact of time zones for investors can be mind-boggling, which we will explore in this research article.


In this analysis, we use two ETFs providing exposure to the Indian stock market: the MSCI India ETF (INDA), which trades in U.S., and the SBI Nifty 50 ETF (SETNIF50.NS), which trades in India.

We benchmark these to the MSCI Emerging Markets ETF (EEM), which also trades in the U.S., and observe that the Indian ETFs exhibited similar trends as the broader emerging markets between 2015 and 2021, but outperformed thereafter, which can partially be attributed to the weak performance of the Chinese stock market that currently dominates EEM with a 27% allocation.