Are Weekend Gaps Always Filled? A Look at Stock Indices

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The weekend price gap is a well-known phenomenon in financial markets, particularly in assets that trade continuously during the week but pause over the weekend, such as stocks, futures, and options. When markets reopen after the weekend, prices sometimes experience a gap up or down due to news, geopolitical events, or macroeconomic developments that occurred while trading was halted. For investors, weekend gaps present both risks and opportunities.

The prevailing belief among traders is that gaps are usually filled. Reference [1] examines this assumption, specifically studying weekend gap dynamics in the DJIA, NASDAQ  100, and the DAX. The authors pointed out,

While our findings do not support a universal tendency for markets to revert to the prior closing price at short distances, they reveal that more pronounced movements at larger thresholds may indicate a partial gap-filling mechanism…Although our descriptive statistics and Chi-square tests show minimal evidence of a predictable “fill-the-gap” bias within ranges closer to the Monday open, there is suggestive evidence for directional price movements further away from the gap, reflecting possible longer-horizon effects…

Our regression and correlation analyses reveal that larger gaps typically coincide with higher short-term volatility, reinforcing the argument that weekend price discontinuities signal an increased uncertainty or risk (Hull & Basu, 2016; Mandelbrot, 1972; Plastun et al., 2020). This effect is particularly pronounced for the DJIA and NASDAQ, where an expanded gap size correlates with a greater likelihood of hitting the Take Profit and Stop Loss thresholds alike…Meanwhile, the DAX, though hinting at a moderate positive association between gap size and Take Profit rates, presents less robust evidence—highlighting how regional factors, sectoral composition, or liquidity conditions may temper volatility responses to weekend gaps.

In short, small to medium-sized gaps are not necessarily filled; rather, they are indicative of increased volatility. Larger gaps, however, exhibit some directional predictability and can be used to design trading strategies. Additionally, European market dynamics differ from those of the U.S.

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References

[1] Marnus Janse van Rensburg, and Terence Van Zyl, Price Gaps and Volatility: Do Weekend Gaps Tend to Close?, J. Risk Financial Manag. 2025, 18, 132

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