Toward Solving of the Turn-of-the-Month Effect Puzzle

27 Pages Posted: 7 Dec 2015 Last revised: 8 Dec 2015

See all articles by Lior Gal

Lior Gal

College for Academic Studies

Uri Benzion

Western Galilee College - Department of Economics

Ahron Rosenfeld

Ben-Gurion University of the Negev - Department of Management

Date Written: December 5, 2015

Abstract

The turn-of-the-month (TOM) anomaly is widely discussed in the literature of the last three decades covering US and other equity markets. In this study we identify new characteristics and sources of this anomaly. We use data of US indices spanning more than 80 years. Our findings relate to existing explanations of the anomaly in the literature, but shed new light on its sources. Our findings pinpoint the specific months during the year in which the anomaly is significant. We show that a significant TOM anomaly in a few months suffices to generate a significant pattern for decades. In addition, we identify the relationship between the TOM effect and other market anomalies as well as the correlation between the anomaly and capital market cycles. Finally, we conclude that the effect exists in the core return data, under regular volatility, and cannot be dismissed as stemming from outliers.

Keywords: turn-of-the-month, anomaly, market efficiency

JEL Classification: G14

Suggested Citation

Gal, Lior and Benzion, Uri and Rosenfeld, Ahron, Toward Solving of the Turn-of-the-Month Effect Puzzle (December 5, 2015). Available at SSRN: https://ssrn.com/abstract=2699571 or http://dx.doi.org/10.2139/ssrn.2699571

Lior Gal (Contact Author)

College for Academic Studies ( email )

Ha-Yotsrim St 2
Or Yehuda, 60218
Israel

Uri Benzion

Western Galilee College - Department of Economics ( email )

POB 2125
Akko, 24121
Israel

Ahron Rosenfeld

Ben-Gurion University of the Negev - Department of Management ( email )

Beer-Sheva 84105
Israel

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