The Turn-Of-The-Month Effect In The S&P 500 (2001-2011)

Abstract

This paper investigates if theturn-of-the-month effect exists in the broad US equity market from January 2001to December 2011 and if applying the knowledge of the turn-of-the-montheffect to move the dates of investment without engaging active tradingstrategies can improve the investment performance during the same period oftime. We find that the turn-of-the-month effect still exists, but its occurrencehas moved to earlier dates. We also find that investment made on days beforethe turn-of-the-month performs better than those made during theturn-of-the-month. Simple time diversification strategy of spreading investmentthroughout the month, which doesnt require a perfect foresight, is also foundto generate a better performance.