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The 'End of Month' effect has been the subject of many scientific studies. Statistics show that stock prices, and in particular US stock prices, tend to go up during the last days and the first days of the month.
Economists Lakonishok and Smidt calculate in their study – Are seasonal anomalies real? A ninety-year perspective – that most of the average annual return of the Dow Jones index over the period 1897-1986 was realised in the first and the last days of the month. Incredibly, keeping a position during the rest of the month, contributes little to an investor's return!
Economists Carchano and Tornero in their study – Calendar Anomalies in Stock Index Futures – write: "Our analysis shows that the 'end of the month' effect in the S&P 500 future is the only calendar effect that is statistically and economically significant over a long period of time."
Investui uses the S&P 500 market index to benefit from the 'End of Month' effect. The strategy opens a position four days before the end of the month and sells the position four days after the start of the month. Many experienced investors use similar strategies.
This chart shows the gross profit generated for clients by the End of Month effect. In 2019 the profit amounted to € 6770 for the standard position of one future or the equivalent in CFDs.
Economists definitely agree on the existence of the 'End of Month' effect. Opinions differ on what precisely causes the effect. Broadly speaking, the effect is caused by a conjunction of significant changes in stock order-flows. At the end of the month, the composition of large funds and insurance portfolios is adjusted. Changes in the composition of the stocks which make up market indexes as well as mergers and acquisitions, also have an impact on the large stock flows.
If there is currently an open position, it is visible in the live positions table.
|Further Evidence on the Turn of the Month Effect, Erhard Reschenhofer – Business and Economics Journal|
|Calendar Anomalies in Stock Index Futures, Oscar Carchano & Ángel Pardo Tornero – University of Valencia|
|An anatomy of Calendar Effects, Laurens Swinkels & Pim van Vliet – Journal of Asset Management|
|Do Seasonal Anomalies Still Work?, Constantine Dzhabarov & William Ziemba – The Journal of Portfolio Management|